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Paper oil, Minsky financial instability hypothesis and casino capitalism

 Why Peak Oil Threatens the Casino Capitalism

News Peak Cheap Energy and Oil Price Slump Recommended Links The idea of Minsky moment Oil glut fallacy Neoliberalism as a New Form of Corporatism Great condensate con
Paper oil and record oil futures trading volumes Oil prices and debt bubble Slightly skeptical view of oil price forecasts        
Russia oil production Deflation of the USA shale oil bubble MSM propagated myth about Saudis defending this market share Iran return to western oil markets fearmongering

Slightly skeptical view of oil price forecasts

 

Oil consumption growth Secular Stagnation
 Energy returned on energy invested (ERoEI) Energy Geopolitics Energy Bookshelf Bakken Reality Check Junk bond bubble Energy disinformation agency and friends US military energy consumption
A note of ERoEI decline  Why Peak Oil Threatens the Casino Capitalism All wars are bankers wars Fiat money, gold and petrodollar Financial Quotes Financial Humor Etc

 

Note: This article sounds pretty counterintuitive in view of current slump of oil prices with a barrel of oil prices below $30 (more then 4 times drop from the highest level achieved.), In other words, instead of peak oil temporary the world is living in the regime of "oil glut" (which is a misnomer, as in reality this is an overproduction of condensate not oil, but at least low prices are real). 

But the key reason for this was extremely rapid increase  of production in the US and Canada in 2012-2014 fueled by cheap credit. Essentially producing "subprime oil" and in parallel the stream of junk bonds that will never be repaid (aka subprime oil as a Ponzi scheme).

At the same time this was not a revolution but a retirement party as fundamental did not change -- abundance of credit for shale oil and tar sand project was just a side effect of QE.

Reprinted from: Commentary: Why Peak Oil Threatens the International Monetary System By Erik Townsend

| January 6, 2013 (Note: Commentaries do not necessarily represent the position of ASPO-USA. )

Introduction

Having spent the last several years of my life engineering investment strategies to profit from the inevitability of Peak Oil, I’ve become obsessed with understanding the ramifications of radically different energy supply dynamics on the global economy. There are many facets to this, some obvious and some not so obvious. So when ASPO-USA Executive Director Jan Mueller approached me at the end of this year’s conference in Austin and asked for an article discussing the less obvious economic impacts of Peak Oil, I knew instantly that the topic should be the threat Peak Oil poses to the International Monetary System (IMS). This connection is critically important, but far from obvious.

I assure you that this story is very much about Peak Oil, but please bear with me, as I’ll need to start by reviewing what the IMS is and how it came about in the first place. Then I’ll explain the role energy has already played in shaping the present-day IMS, and finally, I’ll tie this back to Peak Oil by explaining why rising energy prices could very well be the catalyst that will cause the present system to fail.

What is the International Monetary System?

At the end of World War II, many countries were literally lying in ruin, and needed to be rebuilt. It was clear that international trade would be very important going forward, but how would it work? World leaders recognized the need to architect a new monetary system that would facilitate international trade and allow the world to rebuild itself following the most devastating war in world history.

A global currency was out of the question because the many countries of the world valued their sovereignty, and wanted to continue to issue their own domestic currencies. In order for international trade to flourish, a system was needed to allow trade between dozens of different nations, each with its own currency.

A convention was organized by the United Nations for the purpose of bringing world leaders together to architect this new International Monetary System. The meetings were held in July, 1944 at the Mt. Washington Hotel in Bretton Woods, New Hampshire, and were attended by 730 delegates representing all 44 allied nations. The official name for the event was the United Nations Monetary and Financial Conference, but it would forever be remembered as The Bretton Woods Conference.

To this day, the system designed in those meetings remains the basis for all international trade, and is known as the Bretton Woods System. The system has evolved quite a bit since its inception, but its core principles remain the basis for all international trade. I’m going to focus this article on the parts of the system which I believe are now at risk of radical change, with Peak Oil the most likely catalyst to bring about that change. Readers seeking a deeper understanding of the system itself should refer to the Further Reading section at the end of this article.

Why is an International Monetary System needed?

It simply wouldn’t be practical for all countries to sell their export products to other countries in their own currencies. If one had to pay for wine from France in French Francs (there was no Euro currency in 1944), and then pay to import a BMW automobile in German Marks, then pay for copper produced in Chile in Pesos, each country would face an overwhelming burden just maintaining reserve deposits of all the various world currencies. The system of trade would be very inefficient. For centuries, this problem has been solved by using a single standard currency for all international trade.

Because a standard-currency system dictates that each nation’s central bank will need to maintain a reserve supply of the standard currency in order to facilitate international trade, the standard currency is known as the reserve currency. At various times in history, the Greek Drachma, the Roman Denari, and the Islamic Dinar have served as de-facto reserve currencies. Prior to World War II, the English Pound Sterling was the international reserve currency.

Throughout history, reserve currencies came into and out of use through happenstance. The Bretton Woods conference marked the first time that a global reserve currency was established by formal treaty between cooperating nations. The currency chosen was, of course, the U.S. Dollar.

How does the IMS work?

The core of the system was the U.S. Dollar serving as the standard currency for international trade. To assure other nations of the dollar’s value, the U.S. Treasury would guarantee that other nations could convert their U.S. dollars into gold bullion at a fixed exchange rate of $35/oz. Other nations would then “peg” their currencies to the U.S. dollar at a fixed rate of exchange. Each nation’s central bank would be responsible for “defending” the official exchange rate to the U.S. dollar by offering to buy or sell any amount of currency bid or offered at that price. This meant each nation would need to keep a healthy reserve of U.S. dollars on hand to service the needs of domestic businesses wishing to convert money between the local currency and the U.S. dollar.

By design, the effect of the system was that each national currency was indirectly redeemable for gold. This was true because each nation’s central bank guaranteed convertibility of its own currency to U.S. dollars at some fixed rate of exchange, and the U.S. Treasury guaranteed convertibility of U.S. dollars to gold at a fixed rate of $35/oz. So long as all of the governments involved kept their promises, each nation’s domestic currency would be as good as gold, because it was ultimately convertible to gold. United States President Richard Nixon would break the most central promise of the entire system (U.S. dollar convertibility for gold) on August 15, 1971. I’ll come back to that event later in this article.

Triffin’s Dilemma

In 1959, three years after M. King Hubbert’s now-famous Peak Oil predictions, economist Robert Triffin would make equally prescient predictions about the sustainability of the “new” IMS, which was then only 15 years old. Sadly, Triffin’s predictions, like Hubbert’s, would be ignored by the mainstream.

The whole reason for choosing the U.S. dollar as the global reserve currency was that without a doubt, the U.S.was the world’s strongest credit in 1944. To assure confidence in the system, the strongest, most creditworthy currency on earth was chosen to serve as the standard unit of account for global trade. To eliminate any question about the value of the dollar, the system was designed so that any international holder of U.S. dollars could convert those dollars to gold bullion at a pre-determined fixed rate of exchange. Dollars were literally as good as gold.

Making the USD the world’s reserve currency created an enormous international demand for more dollars to meet each nation’s need to hold a reserve of dollars. The USA was happy to oblige by printing up more greenbacks. This provided sufficient dollars for other nations to hold as foreign exchange reserves, while at the same time allowing the U.S.to spend beyond its means without facing the same repercussions that would occur were it not the world’s reserve currency issuer.

Triffin observed that if you choose a currency because it’s a strong credit, and then give the issuing nation a financial incentive to borrow and print money recklessly without penalty, eventually that currency won’t be the strongest credit any more! This paradox came to be known as Triffin’s Dilemma.

Specifically, Triffin predicted that as issuer of the international reserve currency, the USA would be prone to over consumption, over-indebtedness, and tend toward military adventurism. Unfortunately, the U.S. Government would prove Triffin right on all three counts.

Triffin correctly predicted that the USA would eventually be forced off the gold standard. The international demand for U.S. dollars would allow the USA to create more dollars than it otherwise could have without bringing on domestic inflation. When a country creates too much of its own currency and that money stays in the country, supply-demand dynamics kick in and too much money chasing too few goods and services results in higher prices. But when a country can export its currency to other nations who have an artificial need to hold large amounts of that currency in reserve, the issuing country can create far more money than it otherwise could have, without causing a tidal wave of domestic inflation.

Nixon proves Triffin right

By 1970, the U.S.had drastically over-spent on the Vietnam War, and the number of dollars in circulation far outnumbered the amount of gold actually backing them. Other nations recognized that there wasn’t enough gold in Fort Knox for the U.S.to back all the dollars in circulation, and wisely began to exchange their excess USDs for gold. Before long, something akin to a run on the bullion bank had begun, and it became clear that the USA could not honor the $35 conversion price indefinitely.

On August 15, 1971, President Nixon did exactly what Triffin predicted more than a decade earlier: he declared force majeure, and defaulted unilaterally on the USA’s promise to honor gold conversion at $35/oz, as prescribed by the Bretton Woods accord.

Of course Nixon was not about to admit that the reason this was happening was that the U.S. Government had abused its status as reserve currency issuer and recklessly spent beyond its means. Instead, he blamed “speculators”, and announced that the United States would suspend temporarily the convertibility of the Dollar into gold. Forty-two years later, the word temporarily has taken on new meaning.

Exorbitant Privilege

With the whole world conducting international trade in U.S. dollars, nations with large export markets wound up with a big pile of U.S. dollars (payments for the goods they exported). The most obvious course of action for the foreign companies who received all those dollars as payment for their exported products would be to exchange the dollars on the international market, converting them into their own domestic currencies. What may not be obvious at first glance is that there would be catastrophic unintended consequences if they actually did that.

If all the manufacturing companies in Japan or China converted their dollar revenues back into local currency, the act of selling dollars and buying their domestic currencies would cause their own currencies to appreciate markedly against the dollar. The same holds true for oil exporting countries. If they converted all their dollar revenues back into their own currencies, doing so would make their currencies more expensive against the dollar. That would make their exports less attractive because, being priced in dollars, they would fetch lower and lower prices after being converted back into the exporting nation’s domestic currency.

The solution for the exporting nations was for their central banks to allow commercial exporters to convert their dollars for newly issued domestic currency. The central banks of exporting nations would wind up with a huge surplus of U.S. dollars they needed to invest somewhere without converting them to another currency. The obvious place to invest them was into U.S. Government Bonds.

This is the mechanism through which the reserve currency status of the dollar creates artificial demand for U.S. dollar-denominated treasury debt. That artificial demand allows the United States government to borrow money from foreigners in its own currency, something most nations cannot do at all. What’s more, this artificial demand for U.S. Treasury debt allows the USA to borrow and spend far more borrowed foreign money than it would otherwise be able to, were it not the world’s reserve currency issuer. The reason is that, if not for the artificial need to hold dollar reserves, foreign lenders would be much less inclined to purchase U.S. debt, and would therefore demand much higher interest rates. Similarly, the more that international trade has grown as a result of globalization, the more the United States’ exorbitant privilege has grown.

Have you ever wondered why China, Japan, and the oil exporting nations have such enormous U.S. Treasury bond holdings, despite the fact that they hardly pay any interest these days? The reason is definitely not because those nations think 1.6% interest on a 10-year unsecured loan to a nation known to have a reckless spending habit is a good investment. It’s because they have little other choice. The more their own economies rely on exports priced in dollars, the more they need to keep their own currencies attractively priced relative to the U.S. dollar in order for their exports to remain competitive on the international market. To achieve that outcome, they must hold large reserves denominated in U.S. dollars. That’s why China and Japan – major export economies – are the biggest foreign holders of U.S. debt.

The net effect of this system is that the USA gets to borrow money from foreigners at artificially low interest rates. Moreover, the USA can become over-indebted without the usual consequences of increasing borrowing cost and declining creditworthiness. Other nations have little choice but to maintain a large reserve supply of dollars as the international trade currency. But the U.S. has no need to maintain large reserves of other nations’ currencies, because those currencies are not used in international trade.

By the mid-1960s, this phenomenon became known as exorbitant privilege: That phrase refers to the ability of the USA to go into debt virtually for free, denominated in its own currency, when no other nation enjoys such a privilege. The phrase exorbitant privilege is often attributed to French President Charles de Gaulle, although it was actually his finance minister, Valery Giscard d’Estaing, who coined the phrase.

What’s important to understand here is that the whole reason the U.S. can get away with running trillion-dollar budget deficits without the bond market revolting (a la Greece) is because of exorbitant privilege. And that privilege is a direct consequence of the U.S. dollar serving as the world’s reserve currency. If international trade were not conducted in dollars, exporting nations (both manufacturers and oil exporters) would no longer need to hold large reserves of U.S. dollars.

Put another way, when the U.S. dollar loses its reserve currency status, the U.S. will lose its exorbitant privilege of spending beyond its means on easy credit. The U.S. Treasury bond market will most likely crash, and borrowing costs will skyrocket. Those increased borrowing costs will further exacerbate the fiscal deficit. Can you say self-reinforcing vicious cycle?

But wait… Wasn’t Gold convertibility the whole basis of the system?

If the whole point of the Bretton Woods system was to guarantee that all the currencies of the world were “as good as gold” because they were convertible to U.S. dollars, which in turn were promised to be convertible into gold… And then President Nixon broke that promise in 1971… Wouldn’t that suggest that the whole system should have blown up in reaction to Nixon slamming the gold window shut in August of ’71?

Actually, it almost did. But miraculously, the system has held together for the last 42 years, despite the fact that the most fundamental promise upon which the system was based no longer holds true. To be sure, the Arabs were not happy about Nixon’s action, and they complained loudly at the time, rhetorically asking why they should continue to accept dollars for their oil, if those dollars were not backed by anything, and might just become worthless paper. After all, if U.S. dollars were no longer convertible into gold, what value did they really have to foreigners? The slamming of the gold window by President Nixon in 1971 was not the only cause of the Arab oil embargo, but it was certainly a major influence.

What’s holding the IMS together?

Why didn’t the rest of the world abandon the dollar as the global reserve currency in reaction to the USA unilaterally reneging on gold convertibility in 1971? In my opinion, the best answer is simply “Because there was no clear alternative”. And to be sure, the unmatched power of the U.S.military had a lot to do with eliminating what might otherwise have been attractive alternatives for other nations.

U.S. diplomats made it clear to Arab leaders that they wanted the Arabs to continue pricing their oil in dollars. Not just for U.S.customers, but for the entire world. Indeed, U.S. leaders at the time understood all too well just how much benefit the USA derives from exorbitant privilege, and they weren’t about to give it up.

After a few years of tense negotiations including the infamous oil embargo, the so-called petro-dollar business cycle was born. The Arabs would only accept dollars for their oil, and they would re-invest most of their profits in U.S. Treasury debt. In exchange for this concession, they would come under the protectorate of the U.S. military. Some might even go so far as to say that the U.S. government used the infamous Mafia tactic of making the Arabs an “offer they couldn’t refuse” – forcing oil producing nations to make financial concessions in exchange for “protection”.

With the Arabs now strongly incented to continue pricing the world’s most important commodity in U.S. dollars, the Bretton Woods system lived on. No longer constrained by the threat of a run on its bullion reserves, the U.S. kicked its already-entrenched practice of borrowing and spending beyond its means into high gear. For the past 42 years, the entire world has continued to conduct virtually all international trade in Dollars. This has forced China, Japan, and the oil exporting nations to buy and hold an enormous amount of U.S. Treasury debt. Exorbitant privilege is the key economic factor that allows the U.S.to run trillion dollar fiscal deficits without crashing the Treasury bond market. So far.

There’s a limit to how long this can last

But how long can this continue? The U.S.debt-to-GDP ratio now exceeds 100%, and the U.S. has literally doubled its national debt in the last 6 years alone. It stands to reason that eventually, other nations will lose faith in the dollar and start conducting business in some other currency. In fact, that’s already started to happen, and it’s perhaps the most important, under-reported economic news story in all of history.

Some examples…China and Brazil are now conducting international trade in their own currencies, as are Russia and China. Turkey and Iran are trading oil for gold, bypassing the dollar as a reserve currency. In that case, US sanctions are a big part of the reason Iran can’t sell its oil in dollars. But I wonder if President Obama considered the undermining effect on exorbitant privilege when he imposed those sanctions. I fear that the present U.S. government doesn’t understand the importance of the dollar’s reserve currency role nearly as well as our leaders did in the 1970s.

The Biggest Risk We Face is a US Bond and Currency Crisis

To be sure, Peak Oil in general represents a monumental risk to humanity because it’s literally impossible to feed all 7+ billion people on the planet without abundant energy to run our farming equipment and distribution infrastructure. But the risks stemming directly from declining energy production are not the most imposing, in my view.

Decline rates will be gradual at first, and it will be possible, even if unpopular, to curtail unnecessary energy consumption and give priority to life-sustaining uses for the available supply of liquid fuels. In my opinion, the greatest risks posed by Peak Oil are the consequential risks. These include resource wars between nations, hoarding of scarce resources, and so forth. Chief among these consequential risks is the possibility that the Peak Oil energy crisis will be the catalyst to cause a global financial system meltdown. In my opinion, the USA losing its reserve currency status is likely to be at the heart of such a meltdown.

A good rule of thumb is that if something is unsustainable and cannot continue forever, it will not continue forever. The present incarnation of the IMS, which affords the United States the exorbitant privilege of borrowing a seemingly limitless amount of its own currency from foreigners in order to finance its reckless habit of spending beyond its means with trillion-dollar fiscal deficits, is a perfect example of an unsustainable system that cannot continue forever.

But the bigger the ship, the longer it takes to change course. The IMS is the biggest financial ship in the sea, and miraculously, it has remained afloat for 42 years after the most fundamental justification for its existence (dollar-gold convertibility) was eliminated. How long do we have before the inevitable happens, and what will be the catalyst(s) to bring about fundamental change? Those are the key questions.

In my opinion, the greatest risk to global economic stability is a sovereign debt crisis destroying the value of the world’s reserve currency. In other words, a crash of the U.S. Treasury Bond market. I believe that the loss of reserve currency status is the most likely catalyst to bring about such a crisis.

The fact that the United States’ borrowing and spending habits are unsustainable has been a topic of public discussion for decades. Older readers will recall billionaire Ross Perot exclaiming in his deep Texas accent, “A national debt of five trillion dollars is simply not sustainable!” during his 1992 Presidential campaign. Mr. Perot was right when he said that 20 years ago, but the national debt has since more than tripled. The big crisis has yet to occur. How is this possible? I believe the answer is that because the U.S. dollar is the world’s reserve currency and is perceived by institutional investors around the globe to be the world’s safest currency, it enjoys a certain degree of immunity derived from widespread complacency.

But that immunity cannot last forever. The loss of reserve currency status will be the forcing function that begins a self-reinforcing vicious cycle that brings about a U.S. bond and currency crisis. While many analysts have opined that the USA cannot go on borrowing and spending forever, relatively few have made the connection to loss of reserve currency status as the forcing function to bring about a crisis.

We’re already seeing small leaks in the ship’s hull. China openly promoting the idea that the yuan should be asserted as an alternative global reserve currency would have been unthinkable a decade ago, but is happening today. Major international trade deals (such as China and Brazil) not being denominated in US dollars would have been unthinkable a decade ago, but are happening today.

So we’re already seeing signs that the dollar’s exclusive claim on reserve currency status will be challenged. Remember, when the dollar loses reserve currency status, the U.S.loses exorbitant privilege. The deficit spending party will be over, and interest rates will explode to the upside. But to predict that this will happen right now simply because the system is unsustainable would be unwise. After all, by one important measure the system stopped making sense 42 years ago, but has somehow persisted nonetheless. The key question becomes, what will be the catalyst or proximal trigger that causes the USD to lose reserve currency status, igniting a U.S. Treasury Bond crisis?

Elevated Risk

It’s critical to understand that the USA is presently in a very precarious fiscal situation. The national debt has more than doubled in the last 10 years, but so far, there don’t seem to have been any horrific consequences. Could it be that all this talk about the national debt isn’t such a big deal after all?

The critical point to understand is that while the national debt has more than doubled, the U.S. Government’s cost of borrowing hasn’t increased at all. The reason is that interest rates are less than half what they were 10 years ago. Half the interest on twice as much principal equals the same monthly payment, so to speak. This is exactly the same trap that subprime mortgage borrowers fell into. First, money is borrowed at an artificially low interest rate. But eventually, the interest rate increases, and the cost of borrowing skyrockets. The USA is already running an unprecedented and unsustainable $1 trillion+ annual budget deficit. All it would take to double the already unsustainable deficit is for interest rates to rise to their historical norms.

This all comes back to exorbitant privilege. The only reason interest rates are so low is that the Federal Reserve is intentionally suppressing them to unprecedented low levels in an attempt to combat deflation and resuscitate the economy. The only reason the Fed has the ability to do this is that foreign lenders have an artificial need to hold dollar reserves because the USD is the global reserve currency. They would never accept such low interest rates otherwise. Loss of reserve currency status means loss of exorbitant privilege, and that in turn means the Fed would lose control of interest rates. The Fed might respond by printing even more dollars out of thin air to buy treasury bonds, but in absence of reserve currency status, doing that would cause a collapse of the dollar’s value against other currencies, making all the imported goods we now depend on unaffordable.

In summary, the U.S. Government has repeated the exact same mistake that got all those subprime mortgage borrowers into so much trouble. They are borrowing more money than they can afford to pay back, depending solely on “teaser rates” that won’t last. The U.S. Government’s average maturity of outstanding treasury debt is now barely more than 5 years. This is analogous to cash-out refinancing a 30-year fixed mortgage, replacing it with a much higher principal balance in a 3-year ARM that offers an initial teaser rate. At first, you get to borrow way more money for the same monthly payment. But eventually the rate is adjusted, and the borrower is unable to make the higher payments.

The Janszen Scenario

When it comes to evaluating the risk of a U.S. sovereign debt and currency crisis, most mainstream economists dismiss the possibility out of hand, citing the brilliant wisdom that “the authorities would never let such a thing happen”. These are the same people who were steadfastly convinced that housing prices would never crash in the United States because they never had before, and that Peak Oil is a myth because the shale gas boom solves everything (provided you don’t actually do the math).

At the opposite extreme are the bloggers on the Internet whom I refer to as the Hyperinflation Doom Squad. Their narrative generally goes something like this: Suddenly, when you least expect it, foreigners will wise up and realize that the U.S. national debt cannot be repaid in real terms, and then there will be a panic that results in a crash of the U.S. Treasury market, hyperinflation of the U.S. dollar, and declaration of martial law. This group almost always cites the hyperinflations of Zimbabwe and Argentina as “proof” of what’s going to happen in the USA any day now, but never so much as acknowledges the profound differences in circumstances between the USA and those countries. These folks deserve a little credit for having the right basic idea, but their analysis of what could actually happen simply isn’t credible when examined in detail.

Little-known economist Eric Janszen stands out as an exception. Janszen is the only credible macroeconomic analyst I’m aware of who realistically acknowledges just how real and serious the threat of a U.S. sovereign debt crisis truly is. But his analysis of that risk is based on credible, level-headed thinking complemented by solid references to legitimate economic theory such as Triffin’s Dilemma. Unlike the Doom Squad, Janszen does not rely on specious comparisons of the USA to small, systemically insignificant countries whose past financial crises have little in common with the situation the USA faces. Instead, Janszen offers refreshingly sound, well constructed arguments. Many of the concepts discussed in this article reflect Janszen’s work.

Janszen also happens to be the same guy who coined the phrase Peak Cheap Oil back in 2006, drawing an important distinction between the geological phenomenon of Hubbert’s Peak and the economic phenomenon which begins well before the actual peak, due to increasing marginal cost of production resulting from ever-increasing extraction technology complexity.

“But there’s no sign of inflation…” (Hint: It’s coming)

Janszen has put quite a bit of work into modeling what a U.S. bond and currency crisis would look like. He initially called this KaPoom Theory, because history shows that brief periods of marked deflation (the ‘Ka’) usually precede epic inflations (the ‘Poom’). He recently renamed this body of work The Janszen Scenario.

Briefly summarized, Janszen’s view is that the U.S. has reached the point where excessive borrowing and fiscal irresponsibility will eventually cause a catastrophic currency and bond crisis. He believes that all that’s needed at this point is a proximal trigger, or catalyst, to bring about such an outcome. He thinks there are several potential triggers that could bring such a crisis about, and chief among the possibilities is the next Peak Cheap Oil price spike.

How Peak Oil could cause a Bond and Currency Crisis

There are several ways that an oil price spike could trigger a U.S. bond and currency crisis. Energy is an input cost to almost everything else in the economy, so higher oil prices are very inflationary. The Fed would be hard pressed to continue denying the adverse consequences of quantitative easing in a high inflation environment, and that alone could be the spark that leads to higher treasury yields. The resulting higher cost of borrowing to finance the national debt and fiscal deficit would be devastating to the United States.

A self-reinforcing vicious cycle could easily begin in reaction to oil price-induced inflation alone. But we must also consider how an oil price shock could lead to loss of USD reserve currency status, and therefore, loss of U.S. exorbitant privilege. In the 1970s, the USA represented 80% of the global oil market. Today we represent 20%, and demand growth is projected to come primarily from emerging economies. In other words, the rationale for oil producers to keep pricing their product in dollars has seriously deteriorated since the ‘70s. The more the global price of oil goes up, the more the U.S. will source oil from Canadian tar sands and other non-OPEC sources. That means less and less incentive for the OPEC nations to continue pricing their oil in dollars for all their non-U.S. customers.

Iran and Turkey have already begun transacting oil sales in gold rather than dollars. What if the other oil exporting nations wake up one morning and conclude “Hey, why are we selling our oil for dollars that might some day not be worth anything more than the paper they’re printed on?” Oil represents a huge percentage of international trade, so if oil stopped trading in dollars, that alone would be reason for most nations to reduce the very large dollar reserves they now hold. They would start selling their U.S. treasury bonds, and that could start the vicious cycle of higher interest rates and exploding borrowing costs for the U.S. Government. The precise details are hard to predict. The point is, the system is already precarious and vulnerable, and an oil price shock could easily detonate the time bomb that’s already been ticking away for more than two decades.

What if U.S. Energy Independence claims were true?

There’s another angle here. Peak Oil just might be the catalyst to cause the loss of U.S. exorbitant privilege, even without an oil price shock.

Astute students of Peak Oil already know better than to believe the recently-popularized political rhetoric claiming that the USA will soon achieve energy independence, thanks to the shale oil and gas boom. To be sure, the Bakken, Eagle Ford, and various other U.S. oil and gas plays are a big deal. The most optimistic forecasts I’ve seen show these plays collectively ramping up to as much as 4.8 million barrels per day of production, which is equivalent to about ½ of Saudi Arabia’s current production.

But the infamous “wedge of hope” chart from the EIA projects production declines from existing global resources of 60 million barrels per day by 2030. By the most optimistic projections, all the exciting new plays in the U.S. will replace less than 5 million barrels per day. Where the other 55 million barrels per day will come from remains a mystery! And of course the politicians never bother to mention such minor details when they make predictions of energy independence.

But let’s just pretend for a moment that hyperbole is reality, and that the USA will achieve energy-independence in just a few years’ time. Now consider the consequences to the IMS. The oil-exporting nations would lose the USA as their primary export customer, and would no longer have an incentive to price their oil in dollars, or to maintain large dollar reserves. They would start selling off their U.S. treasury bonds, and pricing their oil in something other than dollars. Large oil importers like China and Japan would stop paying for oil in dollars, and would no longer need to maintain present levels of U.S. dollar reserves. So they too would start selling U.S. treasury bonds, pushing up U.S. interest rates in the process. Once again, we have the ingredients for a self-reinforcing vicious cycle of increasing U.S. interest rates causing U.S. Government borrowing costs to skyrocket.

Without the artificial demand for treasury debt created by exorbitant privilege, the U.S. would be unable to finance its federal budget deficit. The Federal Reserve might respond with even more money printing to monetize all the government’s borrowing needs, but without the international demand that results from the dollar’s reserve currency status, the dollar would crash in value relative to other currencies as a result of excessive monetization by the Fed. The resulting loss of principal value would cause even more international holders of U.S. Treasury debt to panic and sell their holdings. Once again, a self-reinforcing vicious cycle would develop, with consequences for the United States so catastrophic that the 2008 event would pale in contrast.

Rambo to the Rescue?

Let’s not forget that the USA enjoys virtually unchallenged global military hegemony. China is working hard to build out its “blue water navy”, including strategic ballistic missile nuclear submarine capability. But the USA is still top dog on the global power stage, and if the USA was willing to use its nuclear weapons, it could easily defeat any country on earth, except perhaps China and Russia.

While the use of nuclear weapons in an offensive capacity might seem unthinkable today, the USA has yet to endure significant economic hardship. $15/gallon gasoline from the next Peak Cheap Oil price shock coupled with 15% treasury yields and a government operating in crisis mode just to hold off systemic financial collapse in the face of rampant inflation would change the mood considerably.

All the USA has to do in order to secure an unlimited supply of $50/bbl imported oil is to threaten to nuke any country refusing to sell oil to the U.S. for that price. Unthinkable today, but in times of national crisis, morals are often the first thing to be forgotten. We like to tell ourselves that we would never allow economic hardship to cause us to lose our morals. But just look at the YouTube videos of riots at Wal-Mart over nothing more than contention over a limited supply of boxer shorts marked down 20% for Black Friday. What we’ll do in a true crisis that threatens our very way of life is anyone’s guess.

If faced with the choice between a Soviet-style economic collapse and abusing its military power, the USA just might resort to tactics previously thought unimaginable. Exactly what those tactics might be and how it would play out are unknowable. The point is, this is a very complex problem, and a wide array of factors including military capability will play a role in determining the ultimate outcome.

I certainly don’t mean to predict such an apocalyptic outcome. All I’m really trying to say is that the military hegemony of the USA will almost certainly play into the equation. Even if there is no actual military conflict, the ability of the U.S. to defeat almost any opponent will play into the negotiations, if nothing else.

Conclusions

The current incarnation of the International Monetary System, in which the USA enjoys the exorbitant privilege of borrowing practically for free, and is therefore able to pursue reckless fiscal policy with immunity from the adverse consequences that non-reserve currency issuing nations would experience by doing so, cannot continue indefinitely. Therefore, it will not continue indefinitely. How and when it will end is hard to say, especially considering the fact that it’s already persisted for 42 years after it stopped making sense. The system will continue to operate until some catalyst or trigger event brings about catastrophic change.

The next Peak Cheap Oil price spike is not the only possible catalyst to bring about a U.S. bond and currency crisis, but it’s the most likely candidate I’m aware of. I don’t believe that U.S. energy independence is possible, but if it were, the end of oil imports from the Middle East would also be the catalyst to end exorbitant privilege and bring about a U.S.bond and currency crisis. To summarize, the music hasn’t stopped quite yet, but when it does, this will end very, very badly. I’m pretty sure we’re on the last song, but I don’t know how long it has left to play.

Further Reading

Erik Townsend is a hedge fund manager based in Hong Kong.


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[Aug 13, 2018] The Real Reason Why Trump Cancelled The Iran Deal by Eric Zuesse

This is ,of course, hypothesis by Eric Zuesse, and the idea that the USA elite decided to abandon EU elite is somewhat questionable, but some of his consideration are interesting...
Notable quotes:
"... Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night. ..."
Aug 12, 2018 | www.zerohedge.com
45 SHARES Authored by Eric Zuesse via The Strategic Culture Foundation,

The following is entirely from open online sources that I have been finding to be trustworthy on these matters in the past. These sources will be linked-to here; none of this information is secret, even though some details in my resulting analysis of it will be entirely new.

It explains how and why the bottom-line difference between Donald Trump and Barack Obama, regarding US national security policies, turns out to be their different respective estimations of the biggest danger threatening the maintenance of the US dollar as the world's leading or reserve currency. This has been the overriding foreign-policy concern for both Presidents .

Obama placed as being the top threat to the dollar, a breakaway of the EU (America's largest market both for exports and for imports) from alliance with the United States. He was internationally a Europhile. Trump, however, places as being the top threat to the dollar, a breakaway of Saudi Arabia and of the other Gulf Arab oil monarchies from the U.S. Trump is internationally a Sunni-phile: specifically a protector of fundamentalist Sunni monarchs -- but especially of the Sauds themselves -- and they hate Shia and especially the main Shia nation, Iran .

Here's how that change, to Saudi Arabia as being America's main ally, has happened -- actually it's a culmination of decades. Trump is merely the latest part of that process of change. Here is from the US State Department's official historian , regarding this history:

By the 1960s, a surplus of US dollars caused by foreign aid, military spending, and foreign investment threatened this system [the FDR-established 1944 Bretton Woods gold-based US dollar as the world's reserve currency ], as the United States did not have enough gold to cover the volume of dollars in worldwide circulation at the rate of $35 per ounce; as a result, the dollar was overvalued. Presidents John F. Kennedy and Lyndon B. Johnson adopted a series of measures to support the dollar and sustain Bretton Woods: foreign investment disincentives; restrictions on foreign lending; efforts to stem the official outflow of dollars; international monetary reform; and cooperation with other countries. Nothing worked. Meanwhile, traders in foreign exchange markets, believing that the dollar's overvaluation would one day compel the US government to devalue it, proved increasingly inclined to sell dollars. This resulted in periodic runs on the dollar.

It was just such a run on the dollar, along with mounting evidence that the overvalued dollar was undermining the nation's foreign trading position, which prompted President Richard M. Nixon to act, on August 13, 1971 [to end the convertibility of dollars to gold].

When Nixon ended the gold-basis of the dollar and then in 1974 secretly switched to the current oil-basis, this transformation of the dollar's backing, from gold to oil, was intended to enable the debt-financing (as opposed to the tax-financing, which is less acceptable to voters) of whatever military expenditure would be necessary in order to satisfy the profit-needs of Lockheed Corporation and of the other US manufacturers whose only markets are the US Government and its allied governments, as well as of US extractive industries such as oil and mining firms, which rely heavily upon access to foreign natural resources, as well as of Wall Street and its need for selling debt and keeping interest-rates down (and stock-prices -- and therefore aristocrats' wealth -- high and rtising).

This 1974 secret agreement between Nixon and King Saud lasts to the present day, and has worked well for both aristocracies. It met the needs of the very same "military-industrial complex" (the big US Government contractors) that the prior Republican President, Dwight Eisenhower, had warned might take control of US foreign policies. As Bloomberg's Andrea Wong on 30 May 2016 explained the Nixon system that replaced the FDR system, "The basic framework was strikingly simple. The US would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America's spending."

This new system didn't only supply a constant flow of Saudi tax-money to the US Government; it supplied a constant flow of new sales-orders and profits to the military firms that were increasingly coming to control the US Government -- for the benefit of both aristocracies: the Sauds, and America's billionaires.

That was near the end of the FDR-produced 37-year period of US democratic leadership of the world, the era that had started at Bretton Woods in 1944. It came crashing to an end not in 1974 (which was step two after the 1971 step one had ended the 1944 system) but on the day when Ronald Reagan entered the White House in 1981. The shockingly sudden ascent, from that moment on, of US federal Government debt (to be paid-off by future generations instead of by current taxpayers) is shown, right here, in a graph of "US Federal Debt as Percent of GDP, 1940-2015" , where you can see that the debt had peaked above 90% of GDP late in WW II between 1944-1948 , and then plunged during Bretton Woods, but in 1981 it started ascending yet again, until reaching that WW II peak for a second time, as it has been ever since 2010 , when Obama bailed-out the mega-banks and their mega-clients, but didn't bail out the American public, whose finances had been destroyed by those banksters' frauds, which Obama refused to prosecute; and, so, economic inequality in America got even more extreme after the 2008 George W. Bush crash, instead of less extreme afterward (as had always happened in the past).

Above 90% debt/GDP during and immediately following WW II was sound policy, but America's going again above 90% since 2010 has reflected simply an aristocratic heist of America, for only the aristocracy's benefit -- all of the benefits going only to the super-rich.

Another, and more-current US graph shows that, as of the first quarter of 2018, this percentage (debt/GDP) is, yet again, back now to its previous all-time record high of 105-120%%, which had been reached only in 1945-1947 (when it was justified by the war).

Currently, companies such as Lockheed Martin are thriving as they had done during WW II, but the sheer corruption in America's military spending is this time the reason , no World War (yet); so, this time, America is spending like in an all-out-war situation, even before the Congress has issued any declaration of war at all. Everybody except the American public knows that the intense corruptness of the US military is the reason for this restoration of astronomical 'defense' spending, even during peace-time. A major poll even showed that 'defense' spending was the only spending by the federal Government which Americans in 2017 wanted increased; they wanted all other federal spending to be reduced (though there was actually vastly more corruption in military spending than in any other type -- the public have simply been hoodwinked).

But can the US Government's extreme misallocation of wealth, from the public to the insiders, continue without turning this country into a much bigger version of today's Greece? More and more people around the world are worrying about that. Of course, Greece didn't have the world's reserve currency, but what would happen to the net worths of America's billionaires if billionaires worldwide were to lose faith in the dollar? Consequently, there's intensified Presidential worrying about how much longer foreign investors will continue to trust the oil-based dollar.

America's political class now have two competing ideas to deal with this danger , Obama's versus Trump's, both being about how to preserve the dollar in a way that best serves the needs of 'defense' contractors, extractive firms, and Wall Street. Obama chose Europe (America's largest market) as America's chief ally (he was Euro-centric against Russia); Trump chose the owner of Saudi Arabia (he's Saudi-Israeli centric against Iran) -- that's the world's largest weapons-purchaser, as well as the world's largest producer of oil (as well as the largest lobbies) .

The Saudi King owns Saudi Arabia, including the world's largest and most valuable oil company, Aramco, whose oil is the "sweetest" -- the least expensive to extract and refine -- and is also the most abundant, in all of the world, and so he can sell petroleum at a profit even when his competitors cannot. Oil-prices that are so low as to cause economic losses for other oil companies, can still be generating profits -- albeit lowered ones -- for King Saud; and this is the reason why his decisions determine how much the global oil-spigot will be turned on, and how low the global oil-price will be, at any given time. He controls the value of the US dollar. He controls it far more directly, and far more effectively, than the EU can. It would be like, under the old FDR-era Bretton Woods system, controlling the exchange-rates of the dollar, by raising or lowering the amount of gold produced. But this is liquid gold, and King Saud determines its price.

Furthermore, King Saud also leads the Gulf Cooperation Council of all other Arab oil monarchs, such as those who own UAE -- all of them are likewise US allies and major weapons-buyers.

In an extraordinarily fine recent article by Pepe Escobar at Asia Times, "Oil and gas geopolitics: no shelter from the storm" , he quotes from his not-for-attribution interviews with "EU diplomats," and reports:

After the Trump administration's unilateral pull-out from the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), European Union diplomats in Brussels, off the record, and still in shock, admit that they blundered by not "configuring the eurozone as distinct and separate to the dollar hegemony". Now they may be made to pay the price of their impotence via their "outlawed" trade with Iran.

As admitted, never on the record, by experts in Brussels; the EU has got to reevaluate its strategic alliance with an essentially energy independent US, as "we are risking all our energy resources over their Halford Mackinder geopolitical analysis that they must break up [the alliance between] Russia and China."

That's a direct reference to the late Mackinder epigone Zbigniew "Grand Chessboard" Brzezinski, who died dreaming of turning China against Russia.

In Brussels, there's increased recognition that US pressure on Iran, Russia and China is out of geopolitical fear the entire Eurasian land mass, organized as a super-trading bloc via the Belt and Road Initiative (BRI), the Eurasia Economic Union (EAEU), the Shanghai Cooperation Organization (SCO), [and] the Asia Infrastructure Investment Bank (AIIB), is slipping away from Washington's influence.

This analysis gets closer to how the three key nodes of 21st century Eurasia integration -- Russia, China and Iran -- have identified the key issue; both the euro and the yuan must bypass the petrodollar, the ideal means, as the Chinese stress, to "end the oscillation between strong and weak dollar cycles, which has been so profitable for US financial institutions, but lethal to emerging markets."

It's also no secret among Persian Gulf traders that in the -- hopefully unlikely -- event of a US-Saudi-Israeli war in Southwest Asia against Iran, a real scenario war-gamed by the Pentagon would be "the destruction of oil wells in the GCC [Gulf Cooperation Council]. The Strait of Hormuz does not have to be blocked, as destroying the oil wells would be far more effective."

And what the potential loss of over 20% of the world's oil supply would mean is terrifying; the implosion, with unforeseen consequences, of the quadrillion derivatives pyramid, and consequentially [consequently] of the entire Western financial casino superstructure.

In other words: it's not the 'threat' that perhaps, some day, Iran will have nuclear warheads, that is actually driving Trump's concern here (despite what Israel's concerns are about that matter), but instead, it is his concerns about Iran's missiles, which constitute the delivery-system for any Iranian warheads: that their flight-range be short enough so that the Sauds will be outside their range . (The main way Iran intends to respond to an invasion backed by the US, is to attack Saudi Arabia -- Iran's leaders know that the US Government is more dependent upon the Sauds than upon Israel -- so, Iran's top targets would be Saudi capital Riyadh, and also the Ghawar oil field, which holds over half of Saudi oil. If US bases have been used in the invasion, then all US bases in the Middle East are also be within the range of Iran's missiles and therefore would also probably be targeted.)

Obama's deal with Iran had focused solely upon preventing Iran from developing nuclear warheads -- which Obama perhaps thought (mistakenly) would dampen Israel's (and its billionaire US financial backers') ardor for the US to conquer Iran. Israel had publicly said that their concern was Iran's possibility to become a nuclear power like Israel became; those possible future warheads were supposed to be the issue; but, apparently, that wasn't actually the issue which really drove Israel. Obama seems to have thought that it was, but it wasn't, actually. Israel, like the Sauds, want Iran conquered. Simple. The nuclear matter was more an excuse than an explanation.

With Trump now in the White House, overwhelmingly by money from the Israel lobbies (proxies also for the Sauds) -- and with no equivalently organized Jewish opposition to the pro -Israel lobbies (and so in the United States, for a person to be anti-Israel is viewed as being anti-Semitic, which is not at all true, but Israel's lies say it's true and many Americans unfortunately believe it) -- Trump has not only the Sauds and their allies requiring him to be against Iran and its allies, but he has also got this pressure coming from Israel: both the Big-Oil and the Jewish lobbies drive him. Unlike Obama, who wasn't as indebted to the Jewish lobbies, Trump needs to walk the plank for both the Sauds and Israel.

In other words: Trump aims to keep the dollar as the reserve currency by suppressing not only China but also the two main competitors of King Saud: Iran and Russia. That's why America's main 'enemies' now are those three countries and their respective allies.

Obama was likewise targeting them, but in a different priority-order , with Russia being the main one (thus Obama's takeover of Ukraine in February 2014 turning it against Russia, next door ); and that difference was due to Obama's desire to be favorably viewed by the residents in America's biggest export and import market, the EU, and so his bringing another member (Ukraine) into the EU (which still hasn't yet been culminated).

Trump is instead building on his alliance with King Saud and the other GCC monarchs, a group who can more directly cooperate to control the value of the US dollar than the EU can. Furthermore, both conservative (including Orthodox) Jews in the United States, and also white evangelical Protestants in the US, are strongly supportive of Israel, which likewise sides with the Arab oil monarchs against Iran and its allies. Trump needs these people's votes.

Trump also sides with the Sauds against Canada. That's a matter which the theorists who assert that Israel controls the US, instead of that the Sauds (allied with America's and Israel's billionaires) control the US, ignore; they ignore whatever doesn't fit their theory. Of course, a lot doesn't fit their theory (which equates "Jews" with "Israelis" and alleges that "they" control the world), but people whose prejudices are that deep-seated, can't be reached by any facts which contradict their self-defining prejudice. Since it defines themselves, it's a part of them, and they can never deny it, because to do so would be to deny who and what they are, and they refuse to change that. The Sauds control the dollar; Israel does not, but Israel does the lobbying, and both the Sauds and Israel want Iran destroyed. Trump gets this pressure not only from the billionaires but from his voters.

And, of course, Democratic Party billionaires push the narrative that Russia controls America. It used to be the Republican Joseph R. McCarthy's accusation, that the "commies" had "infiltrated" , especially at the State Department . So: Trump kicked out Russia's diplomats, to satisfy those neocons -- the neoconservatives of all Parties and persuasions, both conservative and liberal.

To satisfy the Sauds, despite the EU, Trump has dumped the Iran deal . And he did it also to satisfy Israel, the main US lobbyists for the Sauds. (Americans are far more sympathetic to Jews than to Arabs; the Sauds are aware of this; Israel handles their front-office.) For Trump, the Sauds are higher priority than Europe; even Israel (who are an expense instead of a moneybag for the US Government) are higher priority than Europe. Both the Sauds and Israel together are vastly higher. And the Sauds alone are higher priority for Trump than are even Canada and Europe combined . Under Trump, anything will be done in order to keep the Sauds and their proxy-lobbyists (Israel) 'on America's side'.

Consequently, Trump's political base is mainly against Iran and for Israel, but Obama's was mainly against Russia and for the EU. Obama's Democratic Party still are controlled by the same billionaires as before; and, so, Democrats continue demonizing Russia, and are trying to make as impossible as they can, any rapprochement with Russia -- and, therefore, they smear Trump for anything he might try to do along those lines.

Both Obama and Trump have been aiming to extend America's aristocracy's dominance around the world, but they employ different strategies toward that politically bipartisan American-aristocratic objective: the US Government's global control, for the benefit of the US aristocracy, at everyone else's expense. Obama and Trump were placed into the White House by different groups of US billionaires, and each nominee serves his/her respective sponsors , no public anywhere -- not even their voters' welfare.

An analogous example is that, whereas Fox News, Forbes, National Review, The Weekly Standard, American Spectator, Wall Street Journal, Investors Business Daily, Breitbart News, InfoWars, Reuters, and AP , are propagandists for the Republican Party ; NPR, CNN, NBC, CBS, ABC, Mother Jones, The Atlantic, The New Republic, New Yorker, New York Magazine, New York Times, Washington Post, USA Today, Huffington Post, The Daily Beast , and Salon , are propagandists for the Democratic Party ; but, they all draw their chief sponsors from the same small list of donors who are America's billionaires, since these few people control the top advertisers, investors, and charities, and thus control nearly all of the nation's propaganda. The same people who control the Government control the public; but, America isn't a one-Party dictatorship. America is, instead, a multi-Party dictatorship . And this is how it functions.

Trump cancelled the Iran deal because a different group of billionaires are now in control of the White House, and of the rest of the US Government. Trump's group demonize especially Iran; Obama's group demonize especially Russia. That's it, short. That's America's aristocratic tug-of-war; but both sides of it are for invasion, and for war. Thus, we're in the condition of 'permanent war for permanent peace' -- to satisfy the military contractors and the billionaires who control them. Any US President who would resist that, would invite assassination; but, perhaps in Trump's case, impeachment, or other removal-from-office, would be likelier. In any case, the sponsors need to be satisfied -- or else -- and Trump knows this.

Trump is doing what he thinks he has to be doing, for his own safety. He's just a figurehead for a different faction of the US aristocracy , than Obama was. He's doing what he thinks he needs to be doing, for his survival. Political leadership is an extremely dangerous business. Trump is playing a slightly different game of it than Obama did, because he represents a different faction than Obama did. These two factions of the US aristocracy are also now battling each other for political control over Europe .

caconhma -> MoreSun • Mon, 08/13/2018 - 00:57 Permalink

The article is correct:

The Bottom Line

Trump and its policies have no chance to succeed neither inside nor outside the USA. The USA has less than 3-5 years to maintain the present status quo.

PitBullsRule -> PitBullsRule • Sun, 08/12/2018 - 23:40 Permalink

Yeah, its the defense contractors. It has nothing to do with the zillions of cars that clog every fucking freeway in this country every morning and every evening, 7 days a week. Its not the assholes cruising around in monster trucks alone, just to show off their stupid trucks. It has nothing to do with the the zillions of jets screaming through the skies carry all those fat assholes to meetings all over the world for no reason. It has nothing to do with the billions of barrels of oil that come to the US on tankers as long as city blocks filled constantly day and night.

Its not that, its Lockheed selling them airplanes. Thats how the sand niggers got so much US money, Lockheed.

What a fucking conspiratorial ass-swipe this guy is.

NiggaPleeze -> wet_nurse Mon, 08/13/2018 - 00:02 Permalink

Eric Zeusse ranks in popularity right along the Gatestone Institute - though Eric may just be ignorant and opinionated whilst Gatestone is an affirmative disinformation propaganda organ, both are equally annoying to read. I just came for the comments :).

JSBach1 -> NiggaPleeze Mon, 08/13/2018 - 00:38 Permalink

+1. Eric Zuesse is part-and-parcel of the agenda that the Gatestone Institute espouses.

Eric Zuesse's real agenda can be revealed by his position on 9/11 (see second link below). He also blames Obama for everything (he shifts the blame away from Israel onto any other party which could be blamed due to either direct or indirect ties)

Here is Eric Zuesse in his own words:

Notice the absence of Israel/Zionism

Historic New Harpers Article Exposes Who Controls America
Posted on December 17, 2015 by Eric Zuesse.

"The fundamentalist-Sunni royal family of the Sauds have bought the highest levels of the U.S. government in order to control U.S. foreign policies, especially the ongoing wars to take down the governments of Iraq, Libya, Syria, and ultimately (they hope) of Russia itself, which latter nation has allied itself instead with Shia countries. The controlling entities behind American foreign policies since at least the late 1970s have been the Saud family and the Sauds' subordinate Arabic aristocracies, which are the ones in Qatar (the al-Thanis), Kuwait (the al-Sabahs), Turkey (the Turkish Erdoğans, a new royalty), and UAE (its six royal families: the main one, the al-Nahyans in Abu Dhabi; the other five: the al-Maktoums in Dubai, al-Qasimis in Sharjah, al-Nuaimis in Ajman, al-Mualla Ums in Quwain, and al-Sharqis in Fujairah). Other Saudi-dominated nations -- though they're not oil-rich (more like Turkey in this regard) -- are Pakistan and Afghanistan."

". But, perhaps, one can safely say that the alliance between the U.S. aristocracy and the royal Sauds, is emerging as a global dictatorship, a dictatorial type of world government. Because, clearly: those two aristocraciues have been, to a large extent, ruling the world together, for several decades now. From their perspective, jihadists are themselves a weapon, not merely a political nuisance.

This is a more realistic explanation of America's decades-long catastrophic failures to make significant progress in eliminating even a single one of the numerous jihadist groups around the world: that's how things have been planned to be. It's not just 'intelligence errors' or 'not being tough enough.' Those 'explanations' are just cover-stories, propaganda, PR from the aristocrats. It's skillful 'crowd control': keeping the people in their 'proper' places."

http://washingtonsblog.com/2015/12/historic-new-harpers-article-exposes

9/11: Israel Didn't Do It; The Plan Was Co-Led by U.S. & Saud Governments
By Eric Zuesse

March 15, 2018

"9/11 was a well-planned operation, whatever it was. Substantial money paid for it, but little if any of that came from either Iran or Israel. It all came from fundamentalist-Sunnis.

And, if all of the money was fundamentalist-Sunni, then the only non-Sunni people who could have been involved in planning the operation would have been George W. Bush and his friends

The problem certainly isn't Jews nor Muslims. The problem is the aristocracy, which controls Saudi Arabia, and the aristocracy which controls Israel, and the aristocracy which controls America. The victim is the public, and the victimizer is the aristocracy. It's not just 9/11."

http://www.informationclearinghouse.info/48957.htm

Obama's Nazis
Posted on August 17, 2014 by Eric Zuesse.

(Zuesse's obsession with the word nazis or Nazis)

"What Obama has done and is doing in Ukraine is historic, like what Adolf Hitler did, and like what Slobodan Milosevic* did, and like other racist fascists have done; and he, and we Americans (if we as a nation continue accepting this), will be remembered for it, like they and their countries were. Evil on this scale cannot be forgotten. No matter how solidly the American "news" media hide this history, it is already solidly documented for the history books. Obama will be remembered as the worst President in U.S. history, just as the racist-fascist or 'nazi' leaders of other countries are."

http://washingtonsblog.com/2014/08/obamas-nazis.html

Jewish Billionaire Finances Ukraine's Aydar SS Nazi Troops
Posted on April 7, 2015 by Eric Zuesse.

"The hyper-nationalist Ukrainian-Israeli billionaire Ihor Kolomoysky, a friend of the Obama White House and employer of Joe Biden's son Hunter Biden, is a major donor to far-right Ukrainian causes. He sides with the followers of Stepan Bandera, the pro-Nazi Ukrainian leader whom Hitler ditched when Bandera made clear that he wanted Ukraine to be nazi but independent of Germany's Nazi Party. Briefly, Bandera's #2 in command, Yaroslav Stetsko, led nazi Ukraine, and approved the slaughter of thousands of Jews there."

http://washingtonsblog.com/2015/04/jewish-billionaire-finances-ukraines

"Zuesse is pushing Zionist lies. One of the links in the article goes to a Reuters story, "Exclusive – Over 100 Russian soldiers killed in single Ukraine battle – Russian rights activists," that claims to get its info from the "Russian presidential human rights council."

If you want to read more lies by Zuesse, go to this "AMAZON" link to read reviews of his book, "Iraq War: The Truth," in which Zuesse claims that GW Bush invaded Iraq to thank Jesus for his alcohol and drug addiction cure and to neuter the International Criminal Court???

There is one comment lavishing praise on Zuesse's book about the Iraq War by David Swanson, another Zionist tool and BS artist, who's been outed in the past by the blog, "American Everyman."

https://careandwashingofthebrain.blogspot.com/2014/09/stay-away-from-wh

http://beforeitsnews.com/survival/2015/01/i-expect-my-apology-from-wash

Winston Churchill -> wet_nurse Mon, 08/13/2018 - 00:06 Permalink

A total one, although his mention of MacKinder was only bright spot.

The US has been using the Heartland strategy since before the occupation of Afghanistan, which

was in response to the Taliban approving oil pipelines from Iran to China thru the Kush.The real reason

for the everlasting war there.With the defection of Pakistan to the SCO, the only option is take out Iran

and Turkey now that Syria is lost.Its not even a matter of which faction of billionaires controls empire

policy, its pure geography.You build the alliances around that geography,not the other way around.

The Great Game was played for 200 years over this same ground,only the players have changed.

Hence both the Turkey and Iran situation now, the empire wants control of both,but will probably get neither.

The last roll of the dice.

Hyjinx Sun, 08/12/2018 - 23:42 Permalink

What is this rambling unfocused BS? Just because Trump thought the Iran deal was shitty doesn't mean he works for the Saudis.

OverTheHedge -> My Days Are Ge Mon, 08/13/2018 - 00:20 Permalink

See how fast the internet warriors are to claim the article is rubbish, and not reflecting reality. No argument to back up their propaganda, but that's not important. Must be depressing running the Sunday evening shift in the cubicle farm; all the boys in their neatly pressed uniforms, clicking away to keep us safe from democracy. Well done lads, another day keeping the evil Russians /Iranians at bay.

I actually find it interesting to see what shakes the foundations, and this article seems to be something that they don't like, so probably worth a re-read just to get all the nuances. Of course, the author suggesting that it is not Jews running America will get short shrift from some commenters, but it is certainly interesting to have pointed out, finally, that Israel is a net drain, and Saudi Arabia an enormous gain for the US. We always say to follow the money, and whilst Israel is good profit for the MIC, Saudi Arabia IS the petrodollar system - mustn't forget that. No oil in Saudi Arabia, no petrodollar. I wonder how long they have left until it's all gone? That would probably be the over-riding factor in deciding war with Iran.

Joe A Mon, 08/13/2018 - 00:55 Permalink

I always wondered why the EU did nit make bigger efforts to replace the petrodollar with the petroeuro but nobody wants to end up as Ghadaffi or Saddam Hussein who threatened to do just that. Iran has also repeatedly threaten to that. Also Putin has recently said that Russia wants to move away from the petrodollar. He must know that that is dangerous for one's health so there must be some sort of alliance against the dollar being formed.

hugin-o-munin Mon, 08/13/2018 - 01:15 Permalink

Well written article that sums it up nicely:

The United States is in a state of constant war with the entire world.

[Aug 08, 2018] The U.S. Oil Production "Mirage" by Nick Cunningham

Aug 08, 2018 | oilprice.com

It is a little early to really get a sense of how much the Permian is slowing down. Most analysts have been assuming an overall slowdown over the next 12 months because of pipeline constraints. However, the EIA figures might suggest that the problem has already started to bite. In April, the EIA predicted in its Drilling Productivity Report that Permian production would jump by 73,000 bpd in May. But the monthly data just released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).

Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the overly-optimistic monthly data from April and May, perhaps the agency is also overstating July figures, which raises the possibility that production is not nearly as high as we currently think.

In the coming months, if monthly U.S. production figures continue to show output undershooting expectations, that would have global ramifications. Most analysts still are baking in strong U.S. shale growth figures into their forecasts. If that additional output fails to materialize, the oil market could end up being a lot tighter than we all expected it to be.

[Aug 08, 2018] Prepare for $90 oil after sanctions against Iran take effect analyst

Notable quotes:
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
Aug 06, 2018 | www.rt.com

Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.

"As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," Amrita Sen, chief oil analyst at Energy Aspects, told CNBC Monday.

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday.

"A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," the analyst added.

The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts have said that this time, the negative impact on Iranian oil trade will be less significant, and Iran will lose only half of the previous loss.

Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and other significant players agreed to gradually raise output for fear of supply deficit on the market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000 bpd will be provided by Russia.

For more stories on economy & finance visit RT's business section

Read more

[Aug 08, 2018] US World Oil Production and ExxonMobil Outlook

Aug 08, 2018 | peakoilbarrel.com

Guym says: 08/06/2018 at 8:58 am

Earlier estimates of OPEC have now changed, and there is no increase from June. Probably, a slight decrease from SA. From OPEC sources, not Platts. I think they would start increasing if Iran drops, but not much otherwise. I think Sauds and Kuwait joint venture is set up for that potential.

Changing the way I gage things, into a much simpler format. Now, I look at world inventory drops, and look at current increases from OPEC and US. Neither will change much, so inventory drops should continue. Opec needs to come up with a lot more, or it will look damn scary in 2019. With pipeline constraints, Canada is pretty much out of the picture for further increases this year, and not much, elsewhere.

Energy News says: 08/06/2018 at 11:07 am
Yes the outlook for OPEC's July production is looking more flat now. This is a strange situation because Platts is one of OPEC secondary sources and so I assume that they see all the numbers

Argus – Surprise Saudi decline depresses Opec output
https://www.argusmedia.com/en/news/1729615-surprise-saudi-decline-depresses-opec-output

Yes all the tanker trackers are saying that OPEC exports fell in July, this is Reuters version
Reuters on Twitter: https://pbs.twimg.com/media/Dj541N2WwAAy55o.png

kolbeinh says: 08/06/2018 at 11:54 am
The Platts vs Argus divergence is for sure strange. It is easier to track exports than production numbers.
Monsieur George says: 08/06/2018 at 11:57 am
Thank you. This news confirms that world production is stagnating. Possibly very close to the decline. We will have to be attentive to the inventories. It will be the first place that the nations get hold of in order to supply themselves with oil.

[Aug 08, 2018] America's About To Unleash Its NOPEC 'Superweapon' Against The Russians Saudis

Aug 08, 2018 | www.zerohedge.com

Authored by Andrew Korybko via Oriental Review,

The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.

Officially called the " No Oil Producing and Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables the US to extra-territorially impose its domestic legislation on others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated efforts to control oil prices.

Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by the US courts' likely predetermined judgement against them will probably be used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed in order to achieve several strategic objectives.

The first is that the US wants to break up the Russian-Saudi axis that forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC structure and heralding in the free market liberalization of the global energy industry.

This is decisively to the US' advantage as it seeks to become an energy-exporting superpower, but it must neutralize its competition as much as possible before this happens, ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US could threaten primary sanctions against the state companies involved in implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions against other parties who continue to do business with them.

The purpose behind this approach is to intimidate the US' European vassals into complying with its demands so as to make as much of the continent as possible a captive market of America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .

If successful, this could further erode Europe's shrinking strategic independence and also inflict long-term economic damage on the US' energy rivals that could then be exploited for political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there could eventually see US companies in the emerging energy frontiers of Tanzania , Mozambique , and elsewhere become important suppliers to their country's Chinese rival, which could make Beijing's access to energy even more dependent on American goodwill than ever before.

If looked at as the opening salvo of a global energy war being waged in parallel with the trade one as opposed to being dismissed as the populist piece of legislation that it's being portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is, with its ultimate effectiveness being dependent of course on whether it's properly wielded by American decision makers.

It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but in the event that it ever is, then it might go down in history as the most impactful energy-related development since OPEC, LNG, and fracking.

bshirley1968 -> HilteryTrumpkin Mon, 08/06/2018 - 14:47 Permalink

No way US can manipulate oil trade at this point without hurting themselves or helping their "enemies". Cause and effect, just think it through.

The world needs energy, Russia has energy...and a real surplus for sale. The US is a net energy consumer with no surplus. China needs energy in a big way. Trying to cut off Russian and Iranian oil and trying to blow up the Chinese economy are acts of war. The West realizes there is no way they can survive in their current status of moar with that kind of competition out there. The BRICST now constitute $17 trillion in combined GDP. They have the energy sources (Russia and Iran), they have the manufacturing base (China), they have the agricultural base (Russia, Brazil, South Africa), and they have plenty of customers.....even outside the BRICST union. That is a formidable competitive force to face when you are an economy structured on infinite growth on a finite planet......that you control less and less of each year.

[Aug 06, 2018] The U.S. Oil Production "Mirage" OilPrice.com

Aug 06, 2018 | oilprice.com

It is a little early to really get a sense of how much the Permian is slowing down. Most analysts have been assuming an overall slowdown over the next 12 months because of pipeline constraints. However, the EIA figures might suggest that the problem has already started to bite. In April, the EIA predicted in its Drilling Productivity Report that Permian production would jump by 73,000 bpd in May. But the monthly data just released finds only modest gains in Texas (+20,000 bpd) and New Mexico (+3,000 bpd).

Second, the EIA thinks output broke 11 mb/d in July, an all-time high. But judging by the overly-optimistic monthly data from April and May, perhaps the agency is also overstating July figures, which raises the possibility that production is not nearly as high as we currently think.

In the coming months, if monthly U.S. production figures continue to show output undershooting expectations, that would have global ramifications. Most analysts still are baking in strong U.S. shale growth figures into their forecasts. If that additional output fails to materialize, the oil market could end up being a lot tighter than we all expected it to be.

By Nick Cunningham of Oilprice.com

[Aug 06, 2018] Prepare for $90 oil after sanctions against Iran take effect analyst -- RT Business News

Notable quotes:
"... "As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," ..."
"... "A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," ..."
"... For more stories on economy & finance visit RT's business section ..."
Aug 06, 2018 | www.rt.com

Prepare for $90 oil after sanctions against Iran take effect – analyst Published time: 6 Aug, 2018 21:03 Get short URL Prepare for $90 oil after sanctions against Iran take effect – analyst © China Stringer Network / Reuters Looming US sanctions against Iran will likely hit Tehran's oil sales abroad, and it could lead to a price spike in oil contracts. The first round of renewed US sanctions will take effect on Tuesday with the harshest sanctions, potentially targeting Iran's oil industry, expected to return in early November.

"As we go more towards (the fourth quarter) that's when we really see the risk of prices going well into the 80s and potentially even into the 90s but very critical is how much Iranian production we lose," Amrita Sen, chief oil analyst at Energy Aspects, told CNBC Monday.

Read more © Jorge Silva Is this the end of ultra cheap gasoline in Venezuela?

Oil was trading at $74 per barrel of Brent benchmark, while the US West Texas Intermediate stood at $69.77 on Monday.

"A lot of people think China can just buy all of the Iranian oil but they came out and said: 'Yes, we may not reduce but we are not going to increase our intake either.' So, you could see a significant crunch in terms of lost supplies into the market and then that obviously means higher prices," the analyst added.

The new US sanctions will likely slash oil supply. The last time Iran was sanctioned, it lost half of its exports, which have now returned to 2.4 million barrels per day. Many analysts have said that this time, the negative impact on Iranian oil trade will be less significant, and Iran will lose only half of the previous loss.

Meanwhile, other major producers are ramping up their output. This July, OPEC, Russia and other significant players agreed to gradually raise output for fear of supply deficit on the market. OPEC+ countries will increase production by 1 million barrels per day, of which 200,000 bpd will be provided by Russia.

For more stories on economy & finance visit RT's business section

[Aug 06, 2018] America's About To Unleash Its NOPEC 'Superweapon' Against The Russians Saudis

Aug 06, 2018 | www.zerohedge.com

Authored by Andrew Korybko via Oriental Review,

The US Congress has revived the so-called "NOPEC" bill for countering OPEC and OPEC+.

Officially called the " No Oil Producing and Exporting Cartels Act ", NOPEC is the definition of so-called "lawfare" because it enables the US to extra-territorially impose its domestic legislation on others by giving the government the right to sue OPEC and OPEC+ countries like Russia because of their coordinated efforts to control oil prices.

Lawsuits, however, are unenforceable , which is why the targeted states' refusal to abide by the US courts' likely predetermined judgement against them will probably be used to trigger sanctions under the worst-case scenario, with this chain of events being catalyzed in order to achieve several strategic objectives.

The first is that the US wants to break up the Russian-Saudi axis that forms the core of OPEC+, which leads to the second goal of then unravelling the entire OPEC structure and heralding in the free market liberalization of the global energy industry.

This is decisively to the US' advantage as it seeks to become an energy-exporting superpower, but it must neutralize its competition as much as possible before this happens, ergo the declaration of economic-hybrid war through NOPEC. How it would work in practice is that the US could threaten primary sanctions against the state companies involved in implementing OPEC and OPEC+ agreements, after which these could then be selectively expanded to secondary sanctions against other parties who continue to do business with them.

The purpose behind this approach is to intimidate the US' European vassals into complying with its demands so as to make as much of the continent as possible a captive market of America's energy exporters, which explains why Trump also wants to scrap LNG export licenses to the EU .

If successful, this could further erode Europe's shrinking strategic independence and also inflict long-term economic damage on the US' energy rivals that could then be exploited for political purposes. At the same time, America's recently unveiled " Power Africa " initiative to invest $175 billion in gas projects there could eventually see US companies in the emerging energy frontiers of Tanzania , Mozambique , and elsewhere become important suppliers to their country's Chinese rival, which could make Beijing's access to energy even more dependent on American goodwill than ever before.

If looked at as the opening salvo of a global energy war being waged in parallel with the trade one as opposed to being dismissed as the populist piece of legislation that it's being portrayed as by the media, NOPEC can be seen as the strategic superweapon that it actually is, with its ultimate effectiveness being dependent of course on whether it's properly wielded by American decision makers.

It's too earlier to call it a game-changer because it hasn't even been promulgated yet, but in the event that it ever is, then it might go down in history as the most impactful energy-related development since OPEC, LNG, and fracking.

[Jul 29, 2018] The industry's average decline rate -- the speed at which output falls without field maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year

Jul 29, 2018 | peakoilbarrel.com

Ron Patterson says: 07/28/2018 at 12:40 pm

Behind a paywall but here is the gist of the article

WSJ: As Oil Industry Recovers From a Glut, a Supply Crunch Might Be Looming

Dearth of investments in oil projects mean a spike in prices above $100 could be on the horizon

Crude across the globe is being used up faster than it is being replaced, raising the prospect of even higher oil prices in the coming years.
The world isn't running out of oil. Rather, energy companies and petro-states -- burned by 2014's price collapse -- are spending less on new projects, even though oil prices have more than doubled since 2016. That has sparked concerns among some industry watchers of a massive price spike that could hurt businesses and consumers.
The oil industry needs to replace 33 billion barrels of crude every year to satisfy anticipated demand growth, particularly as developing countries like China and India are consuming more oil. This year, new investments are set to account for an increase of just 20 billion barrels, according to data from Rystad Energy.

The industry's average decline rate -- the speed at which output falls without field maintenance or new drilling -- was 6.3% in 2016 and 5.7% last year, the Norway-based consultancy said. In the four years before the crash, that decline rate was 3.9%.

Any shortfall in supply could push prices higher, similar to when oil hit nearly $150 a barrel in 2008, some industry participants say.
"The years of underinvestment are setting the scene for a supply crunch," said Virendra Chauhan, an oil industry analyst at consultancy Energy Aspects. He believes a production deficit could come as soon as the end of next year, potentially pushing oil above $100 a barrel.

SNIP
In parts of Brazil and Norway, decline rates are already above 10-15%, Energy Aspects' Mr. Chauhan said. Output from Venezuela's aging fields fell by more than 700,000 barrels a day over the past year, according to the IEA. In June, Angola's output hit a 12-year low, while Mexico's production is down nearly 300,000 barrels a day since the middle of 2016, despite efforts to open up the industry and reverse declines, the IEA said.
"Nobody is really stepping in," said Doug King, chief investment officer of the $140 million Merchant Commodity hedge fund. "People still got burned by the downturn."

[Jul 29, 2018] Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil

Jul 29, 2018 | peakoilbarrel.com

George Kaplan says: 07/27/2018 at 3:42 pm

Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that will make things look better. I thought things were worse, partly because I assumed the Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it looks like they are new fields. Overall though it still shows a big drop over the past few years.

https://www.rystadenergy.com/newsevents/news/press-releases/2018-conventional-discovered-resources-on-track-increase/

Watcher says: 07/28/2018 at 2:37 am
Oilprice.com is presenting the same data with a lot more hype and celebration.
George Kaplan says: 07/28/2018 at 4:03 am
A "remarkable" recovery from "abnormally" low levels – complete bollocks, and pretty close to self-contadictory. Everything is, and always will be, awesome in the oilprice universe, if not they'd lose their revenue stream.
Michael B says: 07/28/2018 at 7:00 am
George, I admit I had to rub my eyes when I read that op.com version.

Loathsome Nonsense.

Guym says: 07/28/2018 at 8:28 am
Yeah, because they are mostly deep sea stuff, we should expect to see that pumping by next month? 🤡

[Jul 28, 2018] Fernando Leanme

Jul 28, 2018 | blogspot.com.es

x Ignored says: 07/27/2018 at 3:53 am Iran would not try to block anything unless it is under attack by the US. The Pentagon is opposed to such an attack, but Trump is heavily influenced by Netanyahu and is advised by the same neocons who got the US into the fiasco in Iraq. Given the inability of the US Congress to enforce the constitution by denying the Prsident to start a war without a congressional declaration of war, it seems the USA may be on its way to destroy the world economy to please an extremist Israeli right wing government.

I write destroy the world economy because it's doubtful Iran would respond as anticipated by the Americans, who have a tendency to fight wars with strategies based on previous wars and an excess of complex gadgets and extremely expensive technology. I don't know what they have in mind, but I'm sure it would be unexpected, calibrated to avoid nuclear retaliation, and may evolve over time. But I'm sure others will see the risks, and the oil market will take off into the $100's and possibly $200's unless there's adults left in the USA senate to block this craziness.

  1. Mushalik x Ignored says: 07/26/2018 at 8:11 am Here is something:

    Trump, Iran and the New Guns of August
    https://www.bloomberg.com/view/articles/2018-07-24/trump-iran-and-the-new-guns-of-august

      • Hightrekker x Ignored says: 07/26/2018 at 9:51 am I agree– and with all those KSA installations just 15 minutes away by unstoppable missile technology (1970 midrange seems a little hard for current technology), we have a quandary, not a problem. Reply
        • Fernando Leanme x Ignored says: 07/27/2018 at 3:57 am Exactly. But I'm not sure US National Security advisor Bolton knows anything about low technology midrange missiles and drones, some of which, in a pinch, can be piloted by small light weight kamikaze martyrs.
    • Eulenspiegel x Ignored says: 07/26/2018 at 10:24 am The worst thing for a date to guess is politics.

      There are 10 countries that have to grow oil production to avoid peak oil – these with still big reserves.

      One knocked out itself – Venezuela
      One is under attack from the USA – Iran

      Irak isn't that stable, either.

      A hot war can break out every moment, or a civil war devasting and blocking infrastructure for years, while other countries deplete.

      Or peace can come and these ressources can get used.

      These combined 10 mb/d alone will determine peak oil – by 5 years or more in either direction. These 10 mb/day can't be replaced by russion oil tsars, US rednecks with too much Wallstreet money or Saudis opening secret valves of instant oil wonder production.

      Venezuela can get a new government and increase production by a big amount, helped by international money. It has the ressources to get one of the big producers when the tar oil is lifted.

      So in my eyes, it looks like somewhere between 2020 and 2030, perhaps even later.

    • Iron Osiris x Ignored says: 07/26/2018 at 10:47 am Hi Michael B,

      Couldn't agree with you more regarding OPEC reserve estimates, they are all full of shit, and no one except a handful of people in those countries would know how much they have left.

      Solving this peak oil timing is more similar to a quantum mechanics problem rather than a Newtonian mechanics one. It complexity, lack of transparency and political and economic implication make it impossible to have a deterministic answer, its pure probability, and also speculations.

      Like you i think all these projections are wrong. Maybe we will extract a lot more oil with newer technologies or new field discoveries and end up cooking the planet with climate change, and we won't see a "peak oil" for 100s of years who knows.

    • TechGuy x Ignored says: 07/26/2018 at 2:54 pm "The peak oil experts were dreadfully wrong with their HL 15 years ago, so what prevents their being just as wrong now? "

      Why is Oil at $70/bbl? Back in 1999 its was about $10/bbl. If there no supply constraints why did the price increase ~7 fold in less than 20 years? Also why the need to to drill for Shale Oil (Source Rocks) & develop in Deep & ultradeep water?

      Conventional oil peaked in 2005, All the growth is coming from offshore & Shale. New Oil discoveries have dropped off the cliff. We found almost nothing in 2017. Oil Discoveries peaked in 1960s and been in permanent decline. Thus if we are discovery less and less new oil fields every year, below the rate of consumption, Oil production will have to fall to match discoveries at some point in the future.

      Other clues:
      1. Oil Majors perfer to drill on Wall street (aka using debt to fund stock buybacks) instead of developing new fields for future production.
      2. Shale Debt: Shale drilling never made a profit, except for using OPM (other People's money) to fund CapEx\OpEx.
      3. US invaded or targeted with Regime change in Middle East Oil producing nations. Only Iran remains and you can already hear the War drumbeats for Iran. Reply

      • Michael B x Ignored says: 07/26/2018 at 3:31 pm Indeed, and thanks. Note that your answer has to do not with HL but with obvious signs & symptoms. Believe me, I've been watching, too. The uncertainty is killing me.
    • Fernando Leanme x Ignored says: 07/27/2018 at 4:25 am Michael, I have never been a peak oiler. I come at this from a different perspective: about 30 years ago I noticed exploration results were decaying, and started working in areas which would allow producing oil and gas in the far future from sources we weren't tapping much at the time.

      I remember sitting in a meeting around 1990 and suggesting to managers in a committee I was briefing that we needed to focus on locking up hydrocarbon molecules, wherever they were, cut down exploration and use that money on technology and getting access.

      This is one reason why eventually I got involved in gas conversion to liquids, heavy oil, and the former Soviet Union, which to us appeared like a happy hunting ground, including its Arctic targets in the Barents, Kara, Yamal, etc. I also had colleagues who went into deep water, EOR, North America Arctic, and of course the hydraulic fracturing of vertical horizontal wells drilled in low perm formations.

      So in my case I've been about 30 years now working on replacing conventional oil barrels with more difficult barrels. And those difficult barrels require higher prices. So the question is, what can poor countries afford? Reply

      • Michael B x Ignored says: 07/27/2018 at 5:13 am So, "not a peak oiler" means you think the fate of conventional oil is not really all that important, and cost is the ultimate arbiter, not the resource? Reply
        • Fernando Leanme x Ignored says: 07/27/2018 at 6:19 am Not a peak oiler means I don't use Hubbert Linearization or similar techniques. In the past, my job has included the estimate of resources (not reserves). The preferred technique was to estimate technical reserves, meaning we supposedly didn't focus on economics. But I couldn't have staff working out numbers doing endless iterations and model runs for highly speculative cases, so I gave them the guidance to assume a really high price, a higher OPEX and CAPEX environment, and prepare conceptual field redevelopments and marginal field developments or targeting really low quality reservoirs. We devoted about 5% of the time budget for this effort. And I told head office I wasn't about to use more manpower working such hypothetical figures, because we had to focus on reserve studies, and preparing projects to move reserves along the reserve progression pathway so we could meet our targets.

          The fate of conventional oil is already written, in the sense that most of the extra oil we get from conventional fields comes from redevelopments which rely on higher prices, and EOR. The typical field with say 45% recovery factor can be pounded hard to push it to say 55%, going above 55% gets mighty hard, and pushing to 60% is nearly impossible. So there are limits, which involve the huge amount of resources (cash, steel, chemicals, and people) we use up to get those extra barrels.

          One issue to consider is that these redevelopments which include EOR are not contributing that much extra rate. They stop decline, get a slight bump, and then yield a slower decline rate for 10-20 years. This means investments take tine to payout and if the world is suffering from acute shortages they don't help that much. The on,y fast reaction comes from fracturing "shales" and low permeability sands, infills in newer fields, and workovers. Reply

          • Michael B x Ignored says: 07/27/2018 at 6:53 am Thanks. If you were doing this in the 90s, sounds like you were "predicting" the future! Reply
          • Hickory x Ignored says: 07/27/2018 at 9:20 am Sure sounds like a long explanation for your understanding of 'peak conventional oil'. Nothing to be ashamed of. Reply
  1. AdamB x Ignored says: 07/26/2018 at 10:08 am With oil discoveries the last 3 years in the toilet due to lack of capital investment and lack of major fields its just a matter of time mathematically. Be thankful we still have time before peak production hits cause I don't think it will be fun post peak. Hopefully still 5 years until its official maybe less When will Ghawar give up the ghost .? Reply
  2. Dennis Coyne x Ignored says: 07/26/2018 at 10:58 am Another consideration is discoveries and reserve appreciation. Consider estimates of conventional C+C using Hubbert Linearization by Jean Laherrere which have gradually increased from 1998 (1800 Gb) to 2016 (2500 Gb.) In addition, there is not any particular reason that output would tend to follow a "Hubbert" type logistical function.

    Generally estimates based on Hubbert Linearization would be a minimum estimate in my view.

    In addition conventional oil Extraction rates (output divided by producing reserves) in the World (5.6% in 2016) are far lower than the United States (14.8% in 2016, all C+C), so there is the potential that with higher oil prices the average extraction rate for the World may increase. The World conventional extraction rate was about 11.6% in 1979. A gradually increasing rate of extraction might allow a plateau in output to be extended for many years (to 2030 at least). Impossible to predict of course, the number of scenarios that can be created is large.

    One such scenario is presented below (peak in 2025 at 85.5 Mb/d of C+C or 4275 Mt/year).

    The analysis using the logistic function does not account for this potential.

    Reply

  3. Energy News x Ignored says: 07/26/2018 at 11:44 am International Energy Agency – Oil Market Report: 12 July 2018
    now available to non-subscribers
    download from here: https://www.iea.org/oilmarketreport/omrpublic/currentreport/
    https://pbs.twimg.com/media/DjC5s79XcAA0_xG.jpg
    https://pbs.twimg.com/media/DjC564-W0AETF5a.jpg Reply
  4. TechGuy x Ignored says: 07/26/2018 at 2:26 pm https://srsroccoreport.com/top-u-s-shale-oil-fields-decline-rate-reaches-new-record-half-million-barrels-per-day/
    "While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever." Reply
    • Michael B x Ignored says: 07/26/2018 at 3:51 pm Good article. Reply
      • Dennis Coyne x Ignored says: 07/26/2018 at 6:49 pm I disagree. Oil prices are more likely to increase than to fall to $30/b and more of these companies are likely to be profitable as oil prices rise, also 3 of the top companies are profitable, so a "well run" oil company can indeed be profitable, those that are less well run will either change the way they operate or they will go out of business. The better companies buy the worthwhile assets on the cheap and life goes on.

        It's called capitalism folks. 🙂

        Also the DPR is not very good, I ignore that report and use EIA's tight oil estimates (link below) and shaleprofile.com for good information.

        https://www.eia.gov/energyexplained/data/U.S.%20tight%20oil%20production.xlsx Reply

        • GuyM x Ignored says: 07/27/2018 at 9:12 am "Also the DPR is not very good", is an understatement. I have never seen an analysis use so many different fruits to come up with bananas expected. Reply
    • Minqi Li x Ignored says: 07/26/2018 at 3:55 pm I suppose by "decline rate" they are talking about the "legacy decline" Reply
      • Guym x Ignored says: 07/26/2018 at 5:48 pm As an example, I will use approximate data from a fairly good tier 2 well in the Eagle Ford. It starts off production at 33k the first month, and drops rapidly after that to reach 8k by the final month. Let's say it produces 175k the first year, which would be profitable at today's prices. The next year it produces 55k, and the next year 36k. By the fourth year it is producing less than 100 barrels a day, and by the sixth year it is questionable to keep up. Little better than stripper status. Tier three stuff is much worse, it may reach stripper status by the third year. Eventually, all will be tier two and three status wells. That's the majority of reserves estimated. Estimating future production from current production doesn't touch on reality. Eventually, to keep up on initial production, you would have to drill twice as many wells. But, you won't keep up with twice as many, because the decline rates will be higher. There is a lot of difference between a 600k EUR well, and a 300k EUR, or a 150k EUR. 2042 for US peak? Not hardly. Reply
        • Dennis Coyne x Ignored says: 07/26/2018 at 6:44 pm Guym,

          I agree, probably 2023 to 2025 will be the US peak, after that decline is likely to be rapid because mostly tier 2 and tier 3 wells will be left, high oil prices may make them profitable, but it will be impossible to keep up with the decline rate of legacy wells after 2025 and US output will decline rapidly (4 or 5% per year) after 2030. Reply

          • Guym x Ignored says: 07/26/2018 at 7:00 pm Exactly. Reply
          • TechGuy x Ignored says: 07/26/2018 at 7:48 pm One snag: The Shale Debt starts coming due in 2019 and continues through to 2024. Shale drillers were successful since the borrowed at rock bottom interest rates and investors practically fought each other begging Shale drillers to take their money. Not so sure it will work if interest rates are higher, and The Shale sweet spots aren't endless. Reply
            • Guym x Ignored says: 07/26/2018 at 8:49 pm That might slow the start up, for sure. If the price of oil gets high enough, that will barrier will be short lived. Reply
              • TechGuy x Ignored says: 07/27/2018 at 2:43 pm As oil prices increase so does the costs. It takes a lot of diesel to haul Water, Sand, and oil. Shale drillers never really made a real profit, even when Oil was over $100/bbl. One must consider the EROEI for Shale & rising CapEx\OpEx as the cost of Oil rises.

                Second, its likely that consumers cannot afford high oil prices. As prices rise, Consumers will cut back and it will plunge the global economy back into recession. Perhaps the Worlds Central banks can coach something back into the global economy, but it won't work over the long term.

                FWIW: Some of the recent data is showing weakness in the global economy: Housing sales are falling and prices in the hot regions are flatlining. Trumps tariffs are also taking a toll as global trade is falling. And there are cracks in the developing world credit markets. We might see a stock market correction this fall, which would likely see commodity prices fall (including Oil). Reply

                • Hickory x Ignored says: 07/27/2018 at 10:37 pm " consumers cannot afford high oil prices. As prices rise, Consumers will cut back and it will plunge the global economy back into recession."

                  Well, that likely depends on how fast and far the prices go. Slow steady rise can be well tolerated pretty far. Energy is so cheap for what you get, after all.
                  Many other countries have a much better GDP/unit energy consumed than the USA, and with price pressure the USA could get there too. I suspect we could shed 10-20% of our oil consumption without big effect, particularly if we did it slowly. For example, it wouldn't affect the GDP at all if we slowed down to max 60 mph. Painless saving of energy, if you choose good music.
                  It is the fast changes in price that really tend to hurt. Reply

                  • TechGuy x Ignored says: 07/27/2018 at 11:45 pm "I suspect we could shed 10-20% of our oil consumption without big effect, particularly if we did it slowly."

                    It doesn't work that way. Consumers cut back on spending, from eating out, going on vacations. They loss confidence and delay major purchases like new cars, homes, etc.

                    Most of the population commute to work well below 60 mph. Traffic usually limits speeds to 40 mph or less during commuting hours.

                    To understand how high oil prices affect the economy just research the events around 2007/2008. Schools & business were planning to reduce work & school days to 3 or 4 days a week. Thieves were draining fuel from parked trucks and cars. The higher oil prices caused food prices to soar, which lead to the arab spring in Africa & the middle east. Europe had frequent riots. Airlines & shipping companies impose fuel surcharges. People homes had utilities shutoff. since they could afford their energy bills.

                    Funny how quickly people forget the aftermath of high energy prices. Doesn't anyone read or study economics?

    • GoneFishing x Ignored says: 07/26/2018 at 5:28 pm Nice report. Production decline is a short time away if we don't keep drilling.

      Speaking of legacy wells, the huge number of abandoned wells from the past is leaving us a legacy of leakage. The even bigger number of recent wells will continue that legacy.

      https://arstechnica.com/science/2016/11/abandoned-oil-and-gas-wells-are-still-leaking-methane/ Reply

      • Fernando Leanme x Ignored says: 07/27/2018 at 4:33 am 150 year old wells in the eastern USA could indeed leak methane. But I would not rely much on Arstechnica, it's a blog run by a guy with a liberal arts degree very well crafted to be a cheering section for renewables. It may even be subsidized by Yingli Green, a Chinese solar panel maker. Reply
        • Fred Magyar x Ignored says: 07/27/2018 at 6:57 am Are you seriously claiming that a peer reviewed scientific paper, in the 'Proceedings of The National Academy of Sciences of The United States of America' is somehow untrustworthy because it's conclusions were mentioned by Ars Technica?!

          They also provide a link to the paper:

          http://www.pnas.org/content/113/48/13636

          Identification and characterization of high methane-emitting abandoned oil and gas wells

          Abstract
          Recent measurements of methane emissions from abandoned oil/gas wells show that these wells can be a substantial source of methane to the atmosphere, particularly from a small proportion of high-emitting wells. However, identifying high emitters remains a challenge. We couple 163 well measurements of methane flow rates; ethane, propane, and n-butane concentrations; isotopes of methane; and noble gas concentrations from 88 wells in Pennsylvania with synthesized data from historical documents, field investigations, and state databases. Using our databases, we (i) improve estimates of the number of abandoned wells in Pennsylvania; (ii) characterize key attributes that accompany high emitters, including depth, type, plugging status, and coal area designation; and (iii) estimate attribute-specific and overall methane emissions from abandoned wells. High emitters are best predicted as unplugged gas wells and plugged/vented gas wells in coal areas and appear to be unrelated to the presence of underground natural gas storage areas or unconventional oil/gas production. Repeat measurements over 2 years show that flow rates of high emitters are sustained through time. Our attribute-based methane emission data and our comprehensive estimate of 470,000–750,000 abandoned wells in Pennsylvania result in estimated state-wide emissions of 0.04–0.07 Mt (1012 g) CH4 per year. This estimate represents 5–8% of annual anthropogenic methane emissions in Pennsylvania. Our methodology combining new field measurements with data mining of previously unavailable well attributes and numbers of wells can be used to improve methane emission estimates and prioritize cost-effective mitigation strategies for Pennsylvania and beyond. Reply

  5. Dave Kimble x Ignored says: 07/26/2018 at 6:11 pm All this Hubbertian analysis is useful to set a ceiling on production, but the world's economy runs on making a profit and so producers have a minimum price they must receive, while the end consumers have a maximum price they can afford to pay.

    In mid-2008 the effect of a 72% price rise in 18 months caused a $1.75 trillion extra cost on OECD oil imports and the world economy crashed. Recovery required the USG to guarantee loans to frackers to get the production numbers up. I am not saying that they won't try that again, but this can only go so far. Surely next time this happens, no one will be able to avoid the obvious conclusion that there is no future profit in oil production, and the oil industry will have its share prices downgraded, reducing the collateral for loans, whereupon they will go out of business in a puff of smoke.

    This will happen long before any URR impacts, so I wonder at how much this analysis is worth. Reply

    • Guym x Ignored says: 07/26/2018 at 8:25 pm USG guaranteed loans to frackers???? Interest rates for everyone was low then, but I don't remember reading about any guarantees. Drilling horizontals is a little past SBA stuff. Reply
    • George Kaplan x Ignored says: 07/27/2018 at 1:56 am If the "oil industry" means the IOCs then they are a minor player now. The NOCs dominate the reserves and production, of course they all seem to be having money issues as well but maybe they manifest in a slightly different way – i.e riots, uprisings and infrastructure collapse.

      It's already noticeable that many of the big companies are switching to share buy backs (Total, Shell, Anadarko) and less development spending even as the price has been rising. The one which has switched the other way is ExxonMobil, and not uncoincidentally it is the only one with really good recent discoveries. That straight line H/L for the rest of the world is just the tail run out on existing discoveries, most of which are also already developed and wouldn't be taken off line even with bankruptcies for the operators. If only as chemical feedstock oil is way better in almost every way than anything that could be made from water/CO2/renewable energy so if civilisation lasts long enough most of it will be used. Reply

  6. George Kaplan x Ignored says: 07/27/2018 at 1:44 am Forcing a logistic curve on some of those production histories might give some big errors, though maybe they cancel out overall. Hubbert said himself that H/L wouldn't work well on production that had been artificially constrained by a cartel (e.g. OPEC for Saudi, Kuwait, UAE, Iran and Iraq) or environmental moratoria (e.g. some US and Canada oil). For oil sands they tend to be built on 50 year project lives, with steady production and a fast fall off rather than a traditional decline curve. About 50 mmbbls of reserve is already tied into operating, steady production. Future developments will be similarly constrained with the additional limit from environmental objectives to both the extraction and pipelines. Logistics curves might still come close if the reserve estimates are good, but that is also the biggest unknown as other comments have said. Reply
    • Minqi Li x Ignored says: 07/27/2018 at 2:54 pm Projections are not meant to be predictions. Even EIA or IEA say that. But they are always useful to illustrate given certain assumptions, what will or what are likely to happen.

      That has been said, given our understanding of the inherent limitations of projections/data, a careful and cautious application of these projections does provide us some idea regarding the likely range of future development. For example, the projection for the US oil used in this report is likely to be too optimistic especially for years after 2025, as many have pointed out. That will reinforce the case for a global peak oil before 2025

      In addition to production, I think the consumption data in the report also provides some interesting information. I wonder if someone cares to comment about that. Reply

      • Guym x Ignored says: 07/27/2018 at 7:37 pm Well, obviously consumption can't be over production for any great amount, or we won't have inventory. Peak production precedes any mythical peak demand. Consumption mostly follows production is my guess. At probably a much higher price than today. Reply
  7. Eulenspiegel x Ignored says: 07/27/2018 at 7:25 am An info about the cost of permian wells:
    https://www.zerohedge.com/news/2018-07-26/top-us-shale-oil-fields-decline-rate-reaches-new-record-half-million-barrels-day

    "Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous quarter"

    So it's round about 13 million $ per well, not 7 million. Reply

    • Fernando Leanme x Ignored says: 07/27/2018 at 8:38 am The number of wells brought on isn't proportional to wells drilled. And the CAPEX isn't proportional to wells drilled. Therefore it's hard to derive a per well cost from such figures. Reply
      • GuyM x Ignored says: 07/27/2018 at 9:06 am Yeah, there a lot of DUCs, and you have to consider that Pioneer lays out some bucks for its gathering system and gas processing plant in the Permian. Hard to isolate per well from total capex figures. Reply
      • Eulenspiegel x Ignored says: 07/27/2018 at 9:25 am At least it tells, why the calculation

        (Sale of oil) – well cost – variable cost per barrel = profit

        does not work that good – there are lots of hidden costs even under CAPEX, that are almost as high as completion costs when these 7 million$ / well are right.

        And I think these cost are not one time cost just only in this quarter – there is alway a pipeline to build, a convertert to install, a gravel road to the site to build and so on. Reply

  8. George Kaplan x Ignored says: 07/27/2018 at 3:42 pm Rystad has first half figures for discoveries a bit better than last year, though more on the gas side than oil, but there was a billion barrel Equinor discovery in Brazil this week that will make things look better. I thought things were worse, partly because I assumed the Guyana discoveries would count as appraisals and be back dated against 2016 and 2017, but it looks like they are new fields. Overall though it still shows a big drop over the past few years.

    https://www.rystadenergy.com/newsevents/news/press-releases/2018-conventional-discovered-resources-on-track-increase/

    Reply

  9. George Kaplan x Ignored says: 07/27/2018 at 3:47 pm Baker Hughes rig count up two for USA, twelve for Canada. GoM down one oil and one gas.

    http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview

    Reply

[Jul 28, 2018] Global Oil Discoveries See Remarkable Recovery In 2018 Zero Hedge

Jul 28, 2018 | www.zerohedge.com

two hoots -> Free This Fri, 07/27/2018 - 14:09 Permalink

The oil is good to have but:

With over 3000 platforms, 25,000 miles of pipeline, all unsecure in the Gulf of Mexico, they provide a lucrative target in any conflict with the US. Energy disruptions and environmental calamities would reek havoc. Surely there is a plan to quickly secure the Gulf from under/over/on the water threats? If not get at it.

https://www.fractracker.org/2014/11/latest-incident-gulf-of-mexico/http

moobra -> two hoots Fri, 07/27/2018 - 21:53 Permalink

If you threaten the energy security of the US you will be liberated if you are a country or droned if you are an individual.

shortonoil -> Newbie lurker Fri, 07/27/2018 - 16:28 Permalink

More Oilprice.com industry pimping. The world uses 36 billion barrels (Gb) of crude per year. Plus they are quoting boe, or barrels equivalent. Gas is not crude. The article should read: "The world is still pumping 9 barrels for every 1 it finds". D day is not something the industry doesn't wants advertised.

Victor999 -> Newbie lurker Fri, 07/27/2018 - 17:10 Permalink

We use well over 30B BOE a year, globally. We found new reserves of 4.5B BOE in 2018 so far. Do the math.

Toxicosis -> Free This Fri, 07/27/2018 - 15:13 Permalink

If that's the case, then why are virtually all shale companies in massive debt?

https://srsroccoreport.com/the-shale-oil-ponzi-scheme-explained-how-lou

I don't care if you educate yourself. But stupidity should hurt.

Liquid Courage -> Ghost of PartysOver Fri, 07/27/2018 - 15:18 Permalink

Look at the graph again. Draw a trend line from left to right across the peaks from 2014 til now. Is the line pointing up or down? That's peak oil.

So there's been an up tick this year. How much has been discovered. Ooooh, 4.5 billion barrels. Sounds like a lot to you? What's the world consumption rate expressed in millions of barrels per DAY? Don't know? It's around 90 million barrels per DAY. Look it up if you doubt me. If you divide 4.5 billion by 90 million, you'll calculate how many DAYS it takes to consume 4.5 billion barrels. To make it easier for you, just reduce the fraction by stroking 6 zeros off each number. That's 4,500/90. Not too hard. That's 50 DAYS of supply!!! OK, maybe another 4.5 billion will be found in 2H2018. Oooooh, another 50 DAYS worth. We're saved!!!

In the last paragraph, what's the Reserve Replacement Rate? 10% . That's not so good.

Also, a large portion of the newly discovered oil is offshore, in ultra deep reservoirs. Do you think that might be more expensive to produce?

As for abiotic oil, as Laws of Physics pointed out, even if that desperate theory were true -- which it isn't -- it's the rate of replacement that matters, and it's nowhere near 90 million barrels per day.

So, fore-warned is fore-armed, but if you'd rather bury your head in the sand that's your prerogative.

CorporateCongress -> LawsofPhysics Fri, 07/27/2018 - 15:19 Permalink

Oil consumption alone is almost 100 mmbpd. Meaning that in 6 months they found a whopping 1.5 month of supply... we're nowhere near what we need

Serfs Up Fri, 07/27/2018 - 13:49 Permalink

Average monthly discoveries in 2018 = 826 million barrels

Average monthly usage in 2018 = 2,850 million barrels.

This is fine.

[Jul 27, 2018] Top U.S. Shale Oil Fields Decline Rate Reaches New Record.... Half Million Barrels Per Day by SRSrocco

Images removed...
Notable quotes:
"... Crude price manipulation is important to maintain the (fraudulent) petrodollar system because the sheeple subconsciously measure inflation through the price of gasoline. The Oligarchy that owns The Fed will not give up the petrodollar system because it is their main weapon for global domination and control. Unprofitable shale companies will continue to be lent money ;) ..."
"... That's not what the article is saying. If we stopped drilling and fracking today, in one month's time, the production would decline by 500k bbl/day. To offset that, 500k bbl/day production from new wells needs to be brought online in a month, which is what they're doing. The problem is, the more production, the more they have to drill just to keep production flat. ..."
"... it really was by the end of aug the production will drop by 1/2 mbpd making 10.5 mbpd unless somewhere else they made up for that loss, and thats prolly not counting your ability to bring that new production to mkt, via VW bus? ..."
"... Shale production is used primarily as a diluent, and as a petro chemical feed stock. The majority of it is used by Canada and Mexico. ..."
"... The Eagle Ford shale play here at home went bust two years ago. It has never recovered and does not look like it ever will. Most of my family have to drive to Odessa for oil work. Now the greed over there is raping the workers with exorbitant rental rates. Those poor slobs can't get a break. Well most working folks just can't get a break period. ..."
Jul 26, 2018 | www.zerohedge.com

By the SRSrocco Report ,

While the U.S. reached a new record of 11 million barrels of oil production per day last week, the top five shale oil fields also suffered the highest monthly decline rate ever. This is bad news for the U.S. shale industry as it must produce more and more oil each month, to keep oil production from falling.

According to the newest EIA Drilling Productivity Report, the top five U.S. Shale Oil fields monthly oil decline rate is set to surpass a half million barrels per day in August. Thus, the companies will have to produce at last 500,000 barrels of new oil next month just to keep production flat.

Here are the individual shale oil field charts from the EIA's July Drilling Productivity Report:

The figures that are shown above the UP arrow denote the forecasted new production added next month while the figures above the DOWN arrow provide the monthly legacy decline rate. For example, the chart on the bottom right-hand side is for the Permian Region. The EIA forecasts that the Permian will add 296,000 barrels per day (bpd) of new shale oil production in August, while the existing wells in the field will decline by 223,000 bpd.

If we add up these top five shale oil fields monthly decline rate for August will be 503,000 bpd. Thus, the shale oil companies must produce at least 503,000 bpd of new oil supply next month just to keep production from falling. And, we must remember, this decline rate will continue to increase as shale oil production rises.

We can see this in the following chart below. Again, according to the EIA's figures, the top five U.S. shale oil fields monthly legacy decline rate increased from 398,000 bpd in January to 503,000 bpd for August :

In just the first seven months of 2018, the total monthly decline rate from these top shale fields increased by 26%. These massive decline rates are the very reason the shale oil and gas companies are struggling to make money. A perfect example of this is PXD, Pioneer Resources. Pioneer is the largest shale oil producer in the Permian. According to Pioneer's Q1 2018 Report:

Producing 260 thousand barrels oil equivalent per day (MBOEPD) in the Permian Basin, an increase of 9 MBOEPD, or 3%, compared to the fourth quarter of 2017; first quarter Permian Basin production was at the top end of Pioneer's production guidance range of 252 MBOEPD to 260 MBOEPD; as previously announced, freezing temperatures in early January resulted in production losses of approximately 6 MBOEPD; Permian Basin oil production increased to 170 thousand barrels of oil per day (MBOPD); 63 horizontal wells were placed on production .

Pioneer spent $818 million on capital expenditures (CapEx) for additions to oil and gas properties (drilling and completion costs) during Q1 2018, brought on 63 horizontal wells in the Permian, and only added 9,000 barrels per day of oil equivalent over the previous quarter. So, how much Free Cash Flow did Pioneer make with oil prices at the highest level in almost four years?? Well, you're not going to believe me... so here is Pioneer's Cash Flow Statement below:

Pioneer reported $554 million in cash from operations and spent $818 million drilling and completing oil wells in the Permian and a few other locations. Thus, Pioneer's Free Cash Flow was a negative $264 million. However, Pioneer spent an additional $51 million for additions to other assets and other property and equipment shown right below the RED highlighted line for a total of $869 million in total CapEx spending. Total net free cash flow for Pioneer is -$315 million if we include the additional $51 million.

Therefore, the largest shale oil producer in the Permian spent $264 million more than they made from operations drilling 63 new wells in the Permian and only added a net 9,000 barrels per day of oil equivalent. Now, how economical is that???

How long can this insanity go on??

If we look at the Free Cash Flow for some of the top shale energy companies in Q1 2018, here is the result:

Of the ten shale companies in the chart above (in order: Continental, EOG, Whiting, Concho, Marathon, Oasis, Occidental, Hess, Apache & Pioneer), only three enjoyed positive free cash flow, while seven suffered negative free cash flow losses. The net result of the group was a negative $455 million in free cash flow.

Even with higher oil prices, the U.S. shale energy companies are still struggling to make money.

So, the question remains. What happens to these shale oil companies when the oil price falls back towards $30 when the stock market drops by 50+% over the next few years?? And how is the U.S. Shale Energy Industry going to pay back the $250+ billion in debt??

Lastly, here is my recent video on the Shale Oil Ponzi Scheme if you haven't seen it yet:

https://www.youtube.com/embed/E_He0650klE

Check back for new articles and updates at the SRSrocco Report . Tags Business Finance Oil & Gas Refining and Marketing - NEC Integrated Mining Unconventional Oil & Gas Production Software - NEC Oil & Gas Exploration and Production - NEC


Fahq Yuhaad Thu, 07/26/2018 - 06:01 Permalink

Overt crude oil price manipulation:

http://www.macrotrends.net/1369/crude-oil-price-history-chart

7thGenMO -> Fahq Yuhaad Thu, 07/26/2018 - 06:20 Permalink

Crude price manipulation is important to maintain the (fraudulent) petrodollar system because the sheeple subconsciously measure inflation through the price of gasoline. The Oligarchy that owns The Fed will not give up the petrodollar system because it is their main weapon for global domination and control. Unprofitable shale companies will continue to be lent money ;)

truthseeker47 -> 7thGenMO Thu, 07/26/2018 - 11:22 Permalink

Let's do the math: US produced 11 million bbls a day recently, but production is declining at a rate of 1/2 million bbls/day according to the article. So that means US oil production will be zero bbl/day in about 3 weeks.

El Vaquero -> truthseeker47 Thu, 07/26/2018 - 12:46 Permalink

That's not what the article is saying. If we stopped drilling and fracking today, in one month's time, the production would decline by 500k bbl/day. To offset that, 500k bbl/day production from new wells needs to be brought online in a month, which is what they're doing. The problem is, the more production, the more they have to drill just to keep production flat.

1 Alabama -> El Vaquero Thu, 07/26/2018 - 15:19 Permalink

Houston? We have 1/2 our pipelines in the wrong place

worbsid -> truthseeker47 Thu, 07/26/2018 - 13:28 Permalink

You forgot the /sarc

This is a well know item, horizontal fracking produces very well for a couple years and then not so much. Also known that the US uses 17 to 19 (depending on who is telling) million barrels per day so the US still imports a lot of crude per day. We use it like there is no tomorrow and one day there won't be but I'm 85 so the three words to tranquility applies. "Not my problem".

1 Alabama -> truthseeker47 Thu, 07/26/2018 - 15:25 Permalink

it really was by the end of aug the production will drop by 1/2 mbpd making 10.5 mbpd unless somewhere else they made up for that loss, and thats prolly not counting your ability to bring that new production to mkt, via VW bus?

Sapere aude -> truthseeker47 Thu, 07/26/2018 - 16:11 Permalink

I think you need to redo the maths class

LawsofPhysics -> Fahq Yuhaad Thu, 07/26/2018 - 08:46 Permalink

LOL! Talking about the "price" of anything in the absence of a mechanism for true price discovery is fucking stupid.

oh well, stupid is as stupid does...

"Full Faith and credit"

same

as

it

ever

was!

1 Alabama -> LawsofPhysics Thu, 07/26/2018 - 15:28 Permalink

sister? their has to be another game in town beside absence

hannah -> Fahq Yuhaad Thu, 07/26/2018 - 17:37 Permalink

the yearly chart is very telling. we stayed in a $20-$40 range from the 70's to mid 2000's then bush drove the price up but we fell exactly when obama won the election BUT UNDER OBAMA WE SETTLED INTO A RANGE OF $40-$100....fucking double the old range.

shortonoil -> new game Thu, 07/26/2018 - 08:37 Permalink

The US has 1.7 million operating shale wells. Over the next five years 1.4 million of those wells will have to be replaced to keep production constant. The decline rate for the average shale well is 89% over its first five years. At an average replacement cost of $4.4 million per well the total cost of replacing 1.4 million wells will be $6.2 trillion. The total cost of all the petroleum products consumed by the US over the next five years will approximately $2.5 trillion.

To keep the shale industry alive over the next five years it will cost the US economy 2.5 times as much as it will spend on all the petroleum products it will consume. Expect a massive dislocation in the petroleum industry in the very near future!
http://www.thehillsgroup.org/

SRSrocco -> shortonoil Thu, 07/26/2018 - 09:42 Permalink

Shortonoil,

Excellent point. It's amazing the amount of money that needs to be invested just to replace production.

steve

KrazyUncle -> SRSrocco Thu, 07/26/2018 - 11:03 Permalink

OKay, so what are the top three companies doing that is different from the others to be cash flow positive?

SRSrocco -> KrazyUncle Thu, 07/26/2018 - 11:12 Permalink

KrazyUncle,

First... I don't trust Continental Resources figures, but I can't get into that yet... long story. Second, EOG is spending twice as much as most shale players on CapEx per quarter and are making some free cash flow. However, EOG also paid $97 million in dividends Q1 2018. So, if we subtract out their dividend payouts, EOG only netted $14 million after spending $1.4 billion in Capex during Q1 2018.

Lastly, Whiting's oil production is still less than what it was in 2016. By cutting CapEx spending drastically, from $600 million a quarter two years ago to only $178 million in Q1 2018, they can make some free cash flow. But, by drastically cutting CapEx spending, Whiting won't be able to increase production to pay back the $2.8 billion in long-term debt that they owe.

steve

gdpetti -> SRSrocco Thu, 07/26/2018 - 11:20 Permalink

And this is the same pattern for our govts.... spend more and get less..... the result is inevitable, same with our pumped up markets.... not if, but when.... and it looks to be soon...

Now, Trump wants the EU to buy this gas? It's obviously a very short term deal, or he hasn't looked at the numbers at all... which makes him perfect for his role in the 'out with the OWO, in with the NWO'.

Ponzi scheme is the correct word for this shale industry, same with all of our industries ,as empires all operate this way... pushing off paying the bills till tomorrow, always a new tomorrow... kick that can down the road... the states do it, the fed govt does it... all those not making money do it... and these are the opposite of startups.

MrNoItAll -> gdpetti Thu, 07/26/2018 - 15:12 Permalink

Buying time. Short and sweet. The mere fact that they are so actively "buying time" with these short-term policies is proof that they are aware time is running out, which leaves one to ponder just exactly "how much" time are they trying to buy, and toward what end. Big plans are in the works I suspect, and the end of "buying time" is rapidly approaching.

1 Alabama -> MrNoItAll Thu, 07/26/2018 - 15:33 Permalink

cept that one mans ending is another mans beginning

Juggernaut x2 -> gdpetti Thu, 07/26/2018 - 20:44 Permalink

And now you know why Iran and all of their conventionally pumped crude is in ZOG's sights

Radical Marijuana -> SRSrocco Thu, 07/26/2018 - 13:03 Permalink

"How long can this insanity go on?"

For as long as there are enough natural resources left in the world to be able to strip-mine at about exponentially increasing rates, as enabled by making "money" out of nothing as debts in order to "pay" for doing so, which is a debt slavery system based on the public powers of governments used to back up legalized counterfeiting by private banks, and the big corporations that grew up around those big banks. The oil extraction corporations operate inside of that overall context where everything they are able to do is based on the degree to which the sources of their funding ultimately depend upon being able to continue enforcing frauds.

It is too good a phrase to use to refer to those aspects of that process as being "Ponzi Schemes," since deceived people voluntarily participated in Ponzi's Scheme. The dominant Pyramid Schemes of Globalized Neolithic Civilization are systems that offered people a deal they could not refuse.

The history of oil can not be separated from the history of war. Within the overall context that money is measurement backed by murder, the funding of the oil industry developed as vicious feedback loops due to be able to enforce frauds , despite that about exponentially advancing technologies were enabling about exponentially increasing fraudulence, with respect to the related about exponentially increasing strip-mining.

"How long can this insanity go on?"

Probably for a relatively long time for those who are old and rich, and positioned near the center, toward the top, of the Pyramid Scheme of enforced frauds which achieve symbolic robberies for those people.

Shale oil extraction exemplifies DIMINISHING RETURNS, which applies across everything else that Civilization is doing. "It's amazing the amount of money that needs to be invested just to replace production." It is more "amazing" when one goes through the labyrinth of Money As Debt, which is the MADNESS of negative capital , which is able to be publicly presented as if that is still positive capital. While it is abstractly obvious that murder systems are manifestations of general energy systems, there is relatively little public appreciation of those murder systems backing up the money systems.

Around about the 15 minute mark in the video embedded in the article above, some of the reasons for calling shale oil extraction a "Ponzi Scheme" are outlined, including "Ponzi Stock Finance," which are secondary mechanisms where the MAD Money As Debt travels from its original source ex nihilo through other investors, before going into the shale oil industry. The underlying issues related to DIMINISHING RETURNS will manifest first and foremost through the fundamentally fraudulent financial accounting systems which almost totally dominant Globalized Neolithic Civilization.

"How long can this insanity go on?"

Until those runaway debt insanities provoke sufficient runaway death insanities to cause series of crazy collapses which result in whatever systems of organized crime could continue to operate after the consequences of DIMINISHING RETURNS have worked their way through. Since it is barely possible to exaggerate the degree to which negative extraction was presented as if that was positive production, it is also barely possible to exaggerate the degree of psychotic breakdowns that will manifest when runaway enforced frauds finally have their about exponentially increasing fraudulence go past their tipping points.

The USA became the most important component in Globalized Neolithic Civilization. The USA has led the way into the development of globalized monkey money frauds, backed by the threat of force from apes with atomic bombs, whose lives still mostly became dependent upon the chemical energy in petroleum resources. The USA, therefore, also led the way to the development of shale oil extraction, while that continued to be publicly presented as if that was production.

At the present time, and for the foreseeable finite future, it is politically impossible for human beings living inside of the dominant Civilization to better understand themselves as manifestations of general energy systems. Instead, almost everyone who is adapted to living inside that Civilization has developed ways to present what they are actually doing in the most dishonest and absurdly backward ways possible.

Extracting more and more expensive petroleum resources is merely one of the leading symbols of what is happening everywhere else one looks. That Civilization is almost totally based on being able to back up legalized lies with legalized violence continues to be socially successful to the degree that most people do not understand that, because they have been conditioned to not want to understand that being able to back up lies with violence never stops those lies from still being fundamentally false.

THAT was the source of the "insanity." It is too optimistic to expect that will not continue, despite series of collapses into crazy chaos, and the related series of psychotic breakdowns. Whatever civilization survives will continue to operate according to the principles and methods of organized crime, which will continue to have the related corollaries that the apparent successfulness of those organized crimes will depend upon most people not wanting to understand what is actually happening.

Theoretically, enough people "should" better understand themselves as manifestations of energy systems, which would then include their perceptions of the ways that they lived as nested toroidal vortices engaged in entropic pumping of environmental energy sources. That is made even more theoretically imperative to the degree that some people have better understood some energy systems.

However, throughout everything that operates through Pyramid Schemes, for those continue requires that the pyramidion people do everything they can to make sure that those lower down in those Pyramid Schemes do not understand that those Pyramids are actually NESTED TOROIDAL VORTICES. At the present time, and in the foreseeable finite future, the dominant Civilization will continue intensifying its paradoxical Grand Canyon Contradictions that physical science makes prodigious progress in understanding some energy systems, while political science makes no similar progress in understanding human energy systems, except to the degree that human systems are thereby enabled to become about exponentially more dishonest.

Fracking symbolizes advancing physical technologies, channeled through financial systems which only "advance" by becoming about exponentially more fraudulent. Since almost everything Civilization is doing has become based on that exponentially increasing fraudulence, which in turn is based on exponentially increasing strip-mining, it is politically impossible for that Civilization to stop that "insanity" other than by driving itself some series of psychotic breakdowns.

That "lousy shale oil economics will pull down the U.S economy" is only one of the more and more painfully obviously tips of the immense icebergs of enforced frauds, whose own exponentially increasing fraudulences are melting themselves. (In that context it is old-fashioned nonsense that possessing precious metals is a somewhat saner "solution" to the runaway criminal "insanity" of Civilization.)

roddy6667 -> shortonoil Thu, 07/26/2018 - 12:20 Permalink

The financing behind shale oil is a mix of Bernie Madoff and David Copperfield. When it all falls down it will be fun to watch.

venturen -> shortonoil Thu, 07/26/2018 - 14:27 Permalink

good luck with that

AGuy -> shortonoil Thu, 07/26/2018 - 16:48 Permalink

"At an average replacement cost of $4.4 million per well the total cost of replacing 1.4 million wells will be $6.2 trillion. "

I think your math is way off, To To date, Shale spent about $500B to $750B drilling & operating those 1.7M wells. That said, Shale drillers borrowed about $400B, Its unlikely they'll find more Suckers^H^H^H^H investors to borrow another $400B. Plus they are running out of sweet spots to drill in Bakken & Eagle Ford. I believe currently the only remaining sweet spot they can develop is the Permian Basin. Plus the debt coupon on the borrowed money start coming due between 2019-2023 (They need to roll that debt over).

arrowrod Thu, 07/26/2018 - 07:06 Permalink

Frackers are really dumb. They can't refracture the wells. As soon as their wells run dry, it's game over. Financial guys are really smart. They make pronouncements from their desk. They are never wrong. I'm going back under my bed and work on my Zombie apocalypse cookbook. On sale soon.

shortonoil -> arrowrod Thu, 07/26/2018 - 09:09 Permalink

"Frackers are really dumb. They can't refracture the wells."

They can re-frack their wells, but the yield is abysmally low; so it is rarely attempted. Re-fracking produces very little additional oil. Most of what is produced from refracking is gas, which is a low revenue product. It is, by far, more cost effective to just drill a new well.

shortonoil -> Davidduke2000 Thu, 07/26/2018 - 08:51 Permalink

By our calculations the US is selling the oil it produces at 46% below its full life cycle cost of production. The shale industry is apparently using a business plan that was developed by an Ivy League business school MBA. They got their degree in Advance Ponzi Schemes.
http://www.thehillsgroup.org/

crghill Thu, 07/26/2018 - 11:37 Permalink

My family owned some mineral interest in Blaine County, Oklahoma. It's one of the hottest shale plays out there right now. A well was drilled and it came in just gang busters. Within 3 months, the production had fallen by 86%. The well results out of the gate were so good that the well was mentioned in an investor presentation for a major oil company. I doubt anyone went back to inform the investors of the results 90 days later.

LA_Goldbug -> crghill Thu, 07/26/2018 - 15:53 Permalink

That's Shale. If you're lucky you get initial high rates BUT IT WILL drop in production like hell with time. It's all in the geology. Just look at the perms and you will understand.

R2U2 Thu, 07/26/2018 - 11:41 Permalink

https://www.pkverlegerllc.com/assets/documents/180704200CrudePaper.pdf

American Sucker Thu, 07/26/2018 - 16:06 Permalink

Let me guess, this is another of the peak oil theorists who've called 12 of the last 0 peaks in shale production.

Sapere aude -> American Sucker Thu, 07/26/2018 - 16:14 Permalink

Any idiot can sell goods at half the price it costs them to produce. That is shale. Peak oil theory was proved to be correct. It referred to conventional oil.

At the time sour oil wasn't even used, now a majority of the world's oil is sour. No enhanced oil recovery techniques were available, now every barrel is geeked out. Water flooding failing Ghawar super giant oilfield, shows the desperation to keep up oil production.

shortonoil -> Sapere aude Thu, 07/26/2018 - 17:34 Permalink

As far as I know, every Giant in the world (the less than 1% of total fields that produce 60% of world production) is using some form of tertiary extraction method to keep producing. Tertiary extraction methods retrieve anywhere from 2 to 20% of OOIP (original oil in place). 6 to 7% is probably the average. Ghawar is using CO2 injection, in junction with horizontal wells to extract the last 30 feet of its original 350 foot oil seam. In other words Ghawar is over 90% depleted. That was the main reason that the Saudi's $2 trillion IPO for Aramco fell apart.

With the huge amount of capital outflow now leaving the EM it seems likely that world demand will begin to decline at about the same time production begins to decline. The EM constitutes 38% of world GDP, and 47% of world trade. They also use a greater amount of oil per GDP $ produced than does the DE. As they continue to fail, as we have seen recently from Turkey to Venezuela, their petroleum usage will fall. As Shale has a very limited shelf life (now needing $6.2 trillion over the next five years to keep production even) the US will find itself in the situation of having to deal with whipsawing oil markets. Its precarious debt situation means that it is going to be a rough ride down from here.

http://www.thehillsgroup.org/

R2U2 -> Sapere aude Thu, 07/26/2018 - 17:41 Permalink

China peaked in 2015 and US shale is at the creaming stage. http://peakoilbarrel.com/usa-and-world-oil-production-2/#more-19850

shortonoil -> American Sucker Thu, 07/26/2018 - 16:28 Permalink

As far as I know no one has called a peak in shale production. As long as the FED is giving them a $65/ barrel subsidy with ZIRP it is hard to do. What we can say is that they are planning on taking the $6.2 trillion they will need for new wells over the next 5 years out of your hide. Invest in Neosporin, there is gong to be some chapped asses coming down the pike.

Good article Steve, thanks.

Wild tree -> shortonoil Thu, 07/26/2018 - 18:06 Permalink

I for one want to thank you SOO. Your analysis is also spot on, and along with your real world experience it reminds me of that ole detective show Dragnet, "Just the facts Ma'm, just the facts".

Now if there was an answer that we could all live with....

Robert A. Heinlein Thu, 07/26/2018 - 16:32 Permalink

About what I'd expect. We are 2 years out from the bottom. Exploration and drilling came to halt. Now that's starting to show up in the declines. It will start to pick up now with higher prices. Pendulum swings both ways.

. . . _ _ _ . . . Thu, 07/26/2018 - 16:51 Permalink

"What happens to these shale oil companies when the oil price falls back towards $30..."

This is the part I don't get, unless you are making two separate arguments.

Oil is a strategic resource and as so is an issue of national security. They will produce at a loss until they're all dry, if they have to. The financing will not stop. Same reasoning: Since Musk is advancing the whole globalist agenda, I hesitate to short the hell out of Tesla. The financing may just not ever stop. Can the same be said of the broader market?
They've been wiping out EM debt with jubilees; is that how they plan on printing forever and fueling GDP with debt?

RationalLuddite -> . . . _ _ _ . . . Thu, 07/26/2018 - 18:32 Permalink

I would protest. They will produce at a fiat loss until dry (assuming fiat is still accepted of course). The will not produce at an energy loss though, less than 3 to 4 EROEI.

shortonoil -> RationalLuddite Thu, 07/26/2018 - 20:20 Permalink

A Shale well, with an IP (initial production) of 450 b/d, reaches its energy breakeven point at about 70,000 barrels, or about 10 months. After that point they must be energy subsidized to keep producing; they go from being an energy source to become an energy sink. A conventional well remains an energy source until the WOR (water oil ratio) reaches 45:1, or a 97.8% water cut. At which point they become uneconomical to operate and are shut in. Shale wells are only operational past their energy source/sink point because energy is being input from other sources. Much of that comes from conventional crude - but - the ERoEI of conventional is also falling. The average conventional well will reach its energy breakeven point by 2030. In thermodynamics that is referred to as the "dead state".

http://www.thehillsgroup.org/

shortonoil -> . . . _ _ _ . . . Thu, 07/26/2018 - 19:15 Permalink

Shale production is used primarily as a diluent, and as a petro chemical feed stock. The majority of it is used by Canada and Mexico. The Canadians need it to produce their tar sands oil, and Mexico uses it for their Mayan Heavy. Both are important raw material sources for US oil refineries.

Even though Shale is net energy neutral, or negative, and will never be economical to produce, if the US wants to keep its primary suppliers of crude in business it has to supply them with diluent. The FED has already been subsidizing Shale through its ZIRP policy.

Over its full production life cycle that has contributed about $65 a barrel. In the event that the FED can no longer keep interest rates suppressed subsidizes will have to come from some other source. Those may come through the refineries, or like farmers they may be paid by the bushel. In any event those costs are going to become extremely burdensome as these high decline rate wells need to be replaced frequently. Shale will remain a massive, and growing expensive until the economy has chugged to a halt, and it is no longer needed.

ThrowAwayYourTV Thu, 07/26/2018 - 17:58 Permalink

I'm telling you they're lying thru their teeth about oil. We are sucking the planet dry faster than you can say, "Dry as a popcorn fart."

The powers that be dont want you to know this because they dont want you to slow down because they need your tax money to hold up the sick wobbling over weight monster they created.

lakabarra Thu, 07/26/2018 - 19:32 Permalink

Is that the reason why Iran is of so much importance right now?

nonplused Thu, 07/26/2018 - 19:49 Permalink

I wonder what the decline rate from the Canadian oil sands is? Zero? Sounds about right for the next 50 years!

Justapleb Thu, 07/26/2018 - 20:34 Permalink

It's common knowledge, at least to anyone glancing at the industry, that shale oil has a two-year boom/bust cycle.

But that oil was not supposed to exist. Nor any of the last half century's production.

A year ago, there were articles predicting the shale-induced peak would be 2019. (But shale gas was going to be increasing for another couple of decades.)

You expect profit margins to fall as you squeeze the last of the juice. Not really sure what the news is, or at least why it is so remarkable. Calling it a Ponzi scheme, come now.

attah-boy-Luther Thu, 07/26/2018 - 21:12 Permalink

The Eagle Ford shale play here at home went bust two years ago. It has never recovered and does not look like it ever will. Most of my family have to drive to Odessa for oil work. Now the greed over there is raping the workers with exorbitant rental rates. Those poor slobs can't get a break. Well most working folks just can't get a break period.

[Jul 25, 2018] Risks are rising that oil prices will cause next recession by Tim Mullaney

Jul 25, 2018 | finance.yahoo.com

Quote extracted from: CNBC July 23, 2018

The last five economic recessions all were preceded by a spike in crude oil prices. The recent rise in the price of oil has raised the likelihood of a recession, according to market forecasts. Oil gained more than 20 percent in the first half of 2018, and odds have been rising that higher crude oil prices will spark the next economic downturn.

Continue Reading

[Jul 24, 2018] Rosneft Sees Oil At $80 By Christmas OilPrice.com

Jul 24, 2018 | oilprice.com

Rosneft's chief executive Igor Sechin expects Brent could reach US$80 a barrel by this year's end, Interfax reports citing a TV interview of the oil tycoon. The company's budget for the year is based on a much lower price, at US$63 a barrel, Sechin added, so it's hardly a surprise the CEO is happy with where prices are now.

[Jul 22, 2018] Year end oil price projections vary about $70. $120 seems a bit high before 2019.

Jul 22, 2018 | peakoilbarrel.com

Guym x Ignored says: 07/20/2018 at 8:18 pm

https://www.marketwatch.com/amp/story/guid/6817907A-8C2C-11E8-9897-AFAE7A11BECD

Year end oil price projections vary about $70. $120 seems a bit high before 2019.

George Kaplan x Ignored says: 07/21/2018 at 12:11 am
Some more smallish impacts here, but now, with no spare capacity and stocks heading down, everything is likely to be proportionally more important than before: Hibernia (130 kbpd Brent like oil) looks set for 40 day turn around in September; Cameroon is heading for civil war, which could hit its production (70 kbpd) and Chad's exports (130 kbpd); Phoenix field FPSO in GoM (30 kbpd) will be off station for two months in early 2019. And what's the biggest news story that some of the trade mags. could come up with this week: a 4000 bpd well (and I'd guess very short lived) started up a couple of months early in the GoM.

[Jul 20, 2018] Of course they don't that's why the imaginary oil glut was thought up. Let everyone else think its glut, it drops the price allows U.S. to buy more. Then deliberate increase inventory by buying more then claim inventory as a reason to drop the price?

Jul 20, 2018 | www.zerohedge.com

Sapere aude -> MusicIsYou Thu, 07/19/2018 - 17:36 Permalink

Of course they don't that's why the imaginary oil glut was thought up. Let everyone else think its glut, it drops the price allows U.S. to buy more. Then deliberate increase inventory by buying more then claim inventory as a reason to drop the price?

Then take oil from the SPR through its bidirectional pipelines, designed just for that purpose and pretend it is production, then of course at some stage as I mentioned ages ago, a fictional drawdown sale of millions of barrels of crude from the SPR would have to be made to keep the books straight for oil that's already gone!

Add to that the Ponzi shale still churning out oil costing them $100 to produce for them to sell at $50 then CEO's shouting from rooftops about how profitable it will all be....with none of them making profits, most of them passing dividends over and selling assets and borrowing more and more that they will never be able to pay back and where the Fed did everything possible to fund the at ZIRP or NIRP but failed miserable.

Then of course we get the same old same old Saudi pretending to raise production when its own wells are falling apart and declining rapidly most subject to water flooding, including the Super Giant Ghawar field.

[Jul 19, 2018] Proposed Law Would Allow U.S. to Sue OPEC for Manipulating Oil Market

Jul 19, 2018 | foreignpolicy.com

S 2929 text

perated by high gasoline prices just ahead of the U.S. midterm elections, lawmakers in Congress are trying to make it easier for the United States to sue OPEC. And unlike previous failed efforts to go after the oil-exporting cartel, this time Congress will find a sympathetic ear in the White House.

The bipartisan No Oil Producing and Exporting Cartels Act, or NOPEC bill, would tweak U.S. antitrust law to explicitly ban just the kind of collusive behavior that OPEC was created to engage in. The bill, a carbon copy of previous legislation, makes illegal any activity to restrain the production of oil or gas or set oil and gas prices and knocks away two legal defenses that in the past have shielded OPEC from U.S. antitrust measures.

[Jul 19, 2018] Iran in 1953: How an Oil Cartel Operation Became a Job for the CIA

Jul 19, 2018 | www.informationclearinghouse.info

Extracted from: The State, the Deep State, and the Wall Street Overworld By Peter Dale Scott

The international lawyers of Wall Street did not hide from each other their shared belief that they understood better than Washington the requirements for running the world. As John Foster Dulles wrote in the 1930s to a British colleague,

The word "cartel" has here assumed the stigma of a bogeyman which the politicians are constantly attacking. The fact of the matter is that most of these politicians are highly insular and nationalistic and because the political organization of the world has under such influence been so backward, business people who have had to cope realistically with international problems have had to find ways for getting through and around stupid political barriers. 44

This same mentality also explains why Allen Dulles as an OSS officer in 1945 simply evaded orders from Washington forbidding him to negotiate with SS General Karl Wolff about a conditional surrender of German forces in Italy – an important breach of Roosevelt's agreement with Stalin at Yalta for unconditional surrender, a breach that is regarded by many as helping lead to the Cold War. 45 And it explains why Allen, as CIA Director in 1957, dealt summarily with Eisenhower's reluctance to authorize more than occasional U-2 overflights of the USSR, by secretly approving a plan with Britain's MI-6 whereby U-2 flights could be authorized instead by the UK Prime Minister Macmillan. 46

This mentality exhibited itself in 1952, when Truman's Justice Department sought to break up the cartel agreements whereby Standard Oil of New Jersey (now Exxon) and four other oil majors controlled global oil distribution. (The other four were Standard Oil Company of New York, Standard Oil of California or Socony, Gulf Oil, and Texaco; together with Royal Dutch Shell and Anglo-Iranian, they comprised the so-called Seven Sisters of the cartel.) Faced with a government order to hand over relevant documents, Exxon's lawyer Arthur Dean at Sullivan and Cromwell, where Foster was senior partner, refused: "If it were not for the question of national security, we would be perfectly willing to face either a criminal or a civil suit. But this is the kind of information the Kremlin would love to get its hands on." 47

At this time the oil cartel was working closely with the British Anglo-Iranian Oil Company (AIOC, later BP) to prevent AIOC's nationalization by Iran's Premier Mossadeq, by instituting, in May 1951, a successful boycott of Iranian oil exports.

In May 1951 the AIOC secured the backing of the other oil majors, who had every interest in discouraging nationalisation.... None of the large companies would touch Iranian oil; despite one or two picturesque episodes the boycott held. 48

As a result Iranian oil production fell from 241 million barrels in 1950 to 10.6 million barrels in 1952.

This was accomplished by denying Iran the ability to export its crude oil. At that time, the Seven Sisters controlled almost 99% of the crude oil tankers in the world for such export, and even more importantly, the markets to which it was going. 49

But Truman declined, despite a direct personal appeal from Churchill, to have the CIA participate in efforts to overthrow Mossadeq, and instead dispatched Averell Harriman to Tehran in a failed effort to negotiate a peaceful resolution of Mossadeq's differences with London. 50

All this changed with the election of Eisenhower in November 1952, followed by the appointment of the Dulles brothers to be Secretary of State and head of CIA. The Justice Department's criminal complaint against the oil cartel was swiftly replaced by a civil suit, from which the oil cartel eventually emerged unscathed. 51

Eisenhower, an open friend of the oil industry changed the charges from criminal to civil and transferred responsibility of the case from the Department of Justice to the Department of State – the first time in history that an antitrust case was handed to State for prosecution. Seeing as how the Secretary of State was John Foster Dulles and the defense counsel for the oil cartel was Dulles' former law firm (Sullivan and Cromwell), the case was soon as good as dead. 52

Thereafter

Cooperative control of the world market by the major oil companies remained in effect, with varying degrees of success, until the oil embargo of 1973-74. That the cooperation was more than tacit can be seen by the fact that antitrust regulations were specifically set aside a number of times during the 1950-1973 period, allowing the major companies to negotiate as a group with various Mideastern countries, and after its inception [in 1960], with the Organization of Petroleum Exporting Countries or OPEC. 53

Also in November 1952 CIA officials began planning to involve CIA in the efforts of MI6 and the oil companies in Iran 54 -- although its notorious Operation TP/AJAX to overthrow Mossadeq was not finally approved by Eisenhower until July 22, 1953. 55

The events of 1953 strengthened the role of the oil cartel as a structural component of the American deep state, drawing on its powerful connections to both Wall Street and the CIA. 56 (Another such component was the Arabian-American Oil Company or ARAMCO in Saudi Arabia, which increased oil production in 1951-53 to offset the loss of oil from Iran. Until it was fully nationalized in 1980, ARAMCO maintained undercover CIA personnel like William Eddy among its top advisors.) 57 The five American oil majors in particular were also strengthened by the success of AJAX, as Anglo-Iranian (renamed BP) was henceforth forced to share 40 percent of the oil from its Iran refinery with them.

Nearly all recent accounts of Mossadeq's overthrow treat it as a covert intelligence operation, with the oil cartel (when mentioned at all) playing a subservient role. However the chronology, and above all the belated approval from Eisenhower, suggest that it was CIA that came belatedly in 1953 to assist an earlier oil cartel operation, rather than vice versa. In terms of the deep state, the oil cartel or deep state initiated in 1951 a process that the American public state only authorized two years later. Yet the inevitable bias in academic or archival historiography, working only with those primary sources that are publicly available, is to think of the Mossadeq tragedy as simply a "CIA coup."

[Jul 18, 2018] Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day by Keith Johnson

Jun 22, 2018 | foreignpolicy.com

Major oil producers agreed Friday to a nominal increase in crude production of about 1 million barrels per day, a bid to put a damper on high oil prices. But in practice, major oil exporters will likely only be able to add about half that total to global markets, because many countries are already producing at capacity or face severe threats of supply disruption.

Oil markets weren't calmed by the agreement announced Friday by the Organization of the Petroleum Exporting Countries after a contentious week of meetings. Crude prices in New York rose more than 3 percent to almost $68 a barrel and rose about 2 percent in London to more than $74 a barrel.

OPEC didn't agree to increase production as such. Rather the group, with the addition of nonmember Russia, agreed to respect its existing program of restricting supplies. But since the group had gone well overboard and trimmed output by almost 2 million barrels a day, due in large part to a steep falloff in Venezuelan oil production, respecting the original target will translate into more oil for the global market -- on paper, at least.

In practice, only Saudi Arabia and Russia have the capacity to add significant amounts of crude in the next few months. That means Friday's agreement will end up adding about 600,000 barrels of oil a day to the global market.

The contentious meeting took place under the shadow of vituperation from U.S. President Donald Trump, who worried that high oil and gasoline prices would be politically painful ahead of midterm elections later this year. Even after the group's decision had been announced, Trump was still tweeting hopefully about OPEC increasing production.

[Jul 18, 2018] The United States and the Russian Federation would seem to be natural allies

Jul 18, 2018 | www.moonofalabama.org

Oil as a tool of geopolitics

Peter AU 1 , Jul 17, 2018 4:23:41 PM | 112
VK
I posted the sequence of events used to create the petro dollar back in the 2018-33 thread.
Will post them again here as this thread concerns Kissinger.
More specifics can be added to this planned sequence of events, this just the basics.
...........
In the late 1960s, US found oil at Prudhoe bay and by 1970 it was a proved crude oil reserve.
Due to environmental and other legal challenges, construction of the pipeline was held up.

In late 1972 the US Secretary of the Interior declares the trans-Alaska pipeline to be in the US national interest

1973-74. OPEC oil embargo due to US backing of Israel pushes oil prices up in an initial rise.

1973 (OPEC oil embargo) The Trans-Alaska pipeline Authorization Act legislation is quickly pushed through. Signed by Nixon on November 16 1973. This blocked all further challenges allowing construction to begin. pdf

Late 1973 Nixon along with Saudi Arabia create the petro dollar beginning in 1974.

The trans-Alaska pipeline is pushed through to meet a deadline, no costs spared, first oil delivered through the pipeline 28th July 1977, extra pumps then installed and pipeline running at full capacity by 1980. https://en.wikipedia.org/wiki/Construction_of_the_Trans-Alaska_Pipeline_System

1979-80 the price of oil skyrockets due to the Iranian revolution. The US is now the global economic hegemon as all countries now need US dollars to purchase oil.

Historical crude oil price chart https://img-fotki.yandex.ru/get/65661/111554736.48/0_118d4e_344fb37_orig
..................


I have read that Kissinger withheld information from both Nixon and Israel, but have not followed that line of research.
Here is a piece from an official Kissinger biography. You can see here he was working both sides.

https://history.state.gov/departmenthistory/people/kissinger-henry-a
Kissinger entered the State Department just two weeks before Egypt and Syria launched a surprise attack on Israel. The October War of 1973 played a major role in shaping Kissinger's tenure as Secretary. First, he worked to ensure Israel received an airlift of U.S. military supplies. This airlift helped Israel turn the war in Israel's favor, and it also led members of the Organization of Petroleum Exporting Countries (OPEC) to initiate an oil embargo against the United States. After the implementation of a United Nation's sponsored ceasefire, Kissinger began a series of "shuttle diplomacy" missions, in which he traveled between various Middle East capitals to reach disengagement agreements between the enemy combatants. These efforts produced an agreement in January 1974 between Egypt and Israel and in May 1974 between Syria and Israel. Additionally, Kissinger's efforts contributed to OPEC's decision to lift the embargo.

[Jul 18, 2018] Syria and geopolitics of oil

Jul 18, 2018 | www.moonofalabama.org

Peter AU 1 , Jul 17, 2018 6:46:40 PM | 141

Daniel,

It is noticeable that Trump's US attack any Syrian forces coming too close to US occupied zones of al Tanf and Dier Ezzor. Also Trumps takeover of the Deir Ezzor oilfields where US forces simply set up bases or forward posts in the ISIS occupied area.

Under Trump, US has set up a number of new bases in Syria. On the other hand, no concern about Afrin and Manbij. The Deir Ezzor area is Arab tribes and this and al Hasakah (Kurd/Arab?) is the top end of the Persian Gulf/Mesopotamia oil field.

US now controls al Hasakah and half of Deir Ezzor province. The have been ongoing efforts by the US under Trump to take Al Bukamal. US has a base just south of Al Bukamal in Iraq. US bases are now thick throughout Mesopotamia, with more being built.

Also a new base being installed in Kuwait.

The US controls the Arab shore of the Persian gulf, it now has many bases in Iraq and Syria. The only thing missing is the oil rich strip of Iran running alongside the Persian gulf and Mesopotamia.

[Jul 16, 2018] Big Oil s has a long history of compromising national security for profit

Notable quotes:
"... How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see. ..."
"... Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action. ..."
"... As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales. ..."
"... Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS? ..."
"... There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream  --  now suspended after the recent diplomatic furore. ..."
"... It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria. ..."
"... In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime  --  staking the claim to Syria's untapped resources in the Mediterranean  --  the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS. ..."
Jul 03, 2018 | www.moonofalabama.org

Peter AU 1 | Jul 2, 2018 1:17:16 AM | 28

The Saudi's. Interesting watching them agree to whatever Trump wants. The most recent one was Trump telling them to raise oil output. The Saudi's now are very pro zionist and will back them against the Sunni Palestinians no matter what. If Trumps tells them to pay for a US war or occupation they pay. If they are told to by lots of useless junk from the US MIC, they buy it and manage to pull a twisted smile when Trump turns the screws about billions being peanuts.

Seems very much like KSA is now an expendable asset for the US, and their only chance of survival is a lot of 'yes sir, how high sir'.

Philippe , Jul 2, 2018 2:01:24 AM | 30

@ Peter AU 1 | Jul 2, 2018 1:17:16 AM | 28

How different is it really from the past 70+ years (since that 45' meeting between FDR and the then ruler of KSA), and especially since the "oil shocks" of the 1970's ? The Trumpians are little more direct and crude in their wording, but that is really the only difference I see.

Posted by: Peter L. | Jul 1, 2018 11:21:17 PM | 23

Look no further than the first sentence of the text you quote. It has been documented a few times, including in the Intercept, that there were some very serious money flows towards a certain foundation run by the family of the named person. Money flows that originated in the Gulf. Money flows that were related to what happened in Libia.

Daniel , Jul 2, 2018 2:30:17 AM | 32
Peter AU1, KSA has been a client state of the US ever since FDR muscled in on Great Britain's deal in 1845.
somebody , Jul 2, 2018 10:52:45 AM | 43
That would have something to do with Big Oil's long history of compromising national security for profit

Russia effectively dried up oil deliveries by ISIS from Syria and Iraq via Turkey .

This here is Nafez Ahmeed on what went on when splitting up Syria was considered feasible.

Putin's announcement after Turkey's shooting down of a Russian jet that Turkey has been systematically facilitating ISIS oil sales illustrates how the terror-entity has become a figleaf to justify military action.

As INSURGEintelligence has previously reported, there is significant evidence that high-level elements of Turkish government and intelligence agencies have covertly sponsored Islamist terrorist groups in Syria, including ISIS, and that this has involved permitting black market oil sales.

Why, however, did Vladimir Putin wait until the murder of a Russian pilot before announcing Russia's possession of intelligence on Turkish state-sponsorship of ISIS?

There can be little doubt that Putin had previously been more interested in protecting Russian relations with Turkey as an emerging gas transshipment hub to Europe, under which he and Erdogan planned to build the multibillion Russia-Turkey gas pipeline, Turkish Stream  --  now suspended after the recent diplomatic furore.

US, British and French military operations have been similarly inconsistent, inexplicably failing to shut down ISIS supply lines through Turkey, failing to bomb critical ISIS oil infrastructure including vast convoys of trucks transporting black market oil, and refusing to arm the most effective and secular Kurdish ground forces combating ISIS.

It has become increasingly clear that the US-led coalition strategy is aimed primarily at containment of the group's territorial ambitions within Syria.

....

As Russia expands its military presence in the region in the name of fighting ISIS, the US, Britain and France are now scrambling to ensure they retain a military foothold in Syria  --  an effort to position themselves to make the most of a post-conflict environment. As the US Geological Survey Minerals Yearbook put it:

"Most of the international investors who pulled out of Syria following the deterioration of the safety and security situation throughout the country are expected to remain so until the military and political conflicts are resolved."

In this context, as Russia and Iran consolidate their hold on Syria through the Assad regime  --  staking the claim to Syria's untapped resources in the Mediterranean  --  the acceleration of Western military action offers both a carrot and a stick: the carrot aims to threaten the Assad regime into a political accommodation that capitulates to Western regional energy designs; the stick aims to replace him with a more compliant entity comprised of rebel forces backed by Western allies, the Gulf states and Turkey, whilst containing the most virulent faction, ISIS.

[Jul 16, 2018] 2019 is going to be quite interesting and the events might start at the end of 2018

Jun 20, 2018 | peakoilbarrel.com

Energy news, 06/14/2018 at 4:42 am

BENGHAZI, Libya, June 14 (Reuters) – Libya's Es Sider oil port was shut on Thursday due to armed clashes nearby and at least one storage tank in the neighbouring Ras Lanuf terminal was set alight, an engineer in the area said.
https://www.reuters.com/article/libya-security-oil/update-2-clashes-shut-libyas-es-sider-oil-port-ras-lanuf-tank-on-fire-engineer-idUSL8N1TG1L6
Photo on Twitter: https://pbs.twimg.com/media/DfpGCWwWAAA2wUj.jpg Reply

Guym , 06/14/2018 at 8:40 am

Drop in the bucket to what is happening right now. US will be about 500k less than their (IEA's) expectations into 2019 due to transportation constraints.

George thinks Venezuela will approximate zero by 2019, as do others.

Give them the benefit of doubt and say a one million decrease from 1.6 at the beginning of this year.

IEA is still using production vs export capabilities, which has to change. Europe's refineries have largely stopped buying Iran's oil, as has India. That's 1.1 million that has to be sold elsewhere, or not. On shipping, insurance, and financing that is not affected by the restrictions. I count 2.6 million into 2019 that is not on IEA's plate.

Yeah, as said above, 2019 is going to be quite interesting, most of which we will see the end of 2018. None of this takes into consideration any increase in demand for 2019 that is over the US production projection for 2019 (.9). nor any shortage carried over from 2018. Yeah, we should be hunky dory.

In the investment world, we will still be watching EIA weeklies, to determine what is happening in the rest of the world for awhile. So increased cognitive function won't happen soon.

[Jul 16, 2018] US total (oil + products) inventories made a new low (from the high February 2017)

Notable quotes:
"... "Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence." ..."
"... I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position. ..."
Jul 16, 2018 | peakoilbarrel.com

Energy News, 07/11/2018 at 1:14 pm

US total (oil + products) inventories made a new low (from the high February 2017)

US ending stocks July 6th
Crude oil down -12.6 million barrels
Oil products down -0.7
Overall total, down -13.3 (shown on chart)
Natural Gas: Propane & NGPLs up +6.1 (not included in chart)
Chart: https://pbs.twimg.com/media/Dh1-upjXUBEOjvn.jpg

Weekly change in US total (oil + products) inventories
Chart: https://pbs.twimg.com/media/Dh1_SuAXUAcbc5M.jpg

Mushalik , 07/11/2018 at 3:45 pm
11/7/2018
US crude oil imports and exports update April 2018 data
http://crudeoilpeak.info/us-crude-oil-imports-and-exports-update-april-2018-data
Hickory , 07/12/2018 at 11:12 am
Yes indeed, excellent article as always Matt.

"Conclusion. No matter what clever US energy independence calculations are out there, the fact remains that the US is physically dependent on around 8 mb/d of crude oil imports, 4.3 mb/d out of which come from countries where oil production has already peaked and/or where there are socio-economic or geopolitical problems. As of April 2018 US net crude imports were about 6 mb/d, far from oil independence."

I note also that about 45% of USA imports come from Canada, as well depicted in in your Fig 1. Thus we are 'captives' of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position.

[Jul 15, 2018] Global Energy Dominance is now part of the US National security Strategy

Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and taking over the rich energy hub (Mafia style) to the south of Eurasia.
Notable quotes:
"... Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US. ..."
"... Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits. ..."
"... Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel. ..."
"... Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise. ..."
Jul 15, 2018 | www.moonofalabama.org

Peter AU 1 , Jul 14, 2018 4:55:33 PM | 101

The latest article at the Saker site by Rostislav Ishchenko - Trump's Geopolitical Cruise - I think is the best take on Trump's and his backers mindset. Worth a read and covers what I think was the cause of the split in the US elite.

The petro dollar, kicking off in the late 70s was a piece of creative accounting to give unlimited credit. This should have been ended with the collapse of the Soviet Union, but greed got the better of most. Trump and the people backing him could see that this was now in its terminal stages and US close to collapse itself.

Rostislav Ishchenko, like many thinks that Trump is pulling the US back to a form of isolation from the world, but I don't think this is the case.

Global Energy Dominance is now part of the US National security Strategy. Although not labeled as global, when reading through the energy dominance section of the NSS, it can clearly been seen to be global. This is not just about sell oil produced in the US.

Trump is going for the Achilles heel of Eurasia - energy. Rather than a creative accounting scam that simply racks up huge amounts of debt, Trump is looking for a monopoly or near monopoly business to take over and rake in the profits.

Russia supply energy to Eurasia from the North. The opening for the Trump mob is in the south. The meet with Putin may well be to sound out the possibilities of forming a cartel.

Putin/Russia is also the only entity that can prevent Trump's US from simply walking in and taking over the rich energy hub (Mafia style) to the south of Eurasia.

Daniel , Jul 14, 2018 5:35:42 PM | 104

Peter @101

"Global Energy Dominance is now part of the US National security Strategy."

Yes, it absolutely is. But this is not a new "Trump policy." Certainly Zbiginew Brzezenski laid this out quite clearly in his 1997 book, "The Grand Chessboard: American Primacy and Its Geostrategic Imperatives." It's really all in there, just as you're now identifying. If you can't take the time to read it, please consider at least reading some book reviews. As I've noted before, Ziggy apparently didn't foresee Putin rising to power and restoring the Russian state, which threw the proverbial monkey wrench into the globalists' plans, but really, US foreign policy has continued to follow his plans otherwise.

Kissinger has written much the same, though I don't recall in which books/articles. This page from the US Navy seems a fine reading list, designed as it appears to indoctrinate officers in AZ Empire geopolitics.

http://www.navy.mil/ah_online/CNO-ReadingProgram/partnernetwork.html#!

IMO, the US took the lead in the Empire's Global Energy Dominance quest when FDR met with King Saud on Great Bitter Lake in the Suez Canal in 1945 (swinging by after the final post-war world planning meeting with Churchill and Stalin at Yalta). This was when the US largely replaced Great Britain in primacy over Asian/Middle Eastern energy dominance.

Peter AU 1 , Jul 14, 2018 5:42:51 PM | 105
Daniel, I will read through the Grand Chessboard again.
Peter AU 1 , Jul 14, 2018 5:49:29 PM | 106
US setting up more bases. A base in Iraq, and a large airfreight logistics base in Kuwait.
https://sputniknews.com/middleeast/201807141066354147-new-us-bases-iraq/

The US is in the Persian Gulf to stay. Trumps face face meet with Putin will be so Trump can try and gauge what Putin will do - if he will run any blocking moves, his reaction to a fait accompli ect. Most likely a few more face to face meetings before any move on Iran.

Daniel , Jul 14, 2018 6:52:45 PM | 108
Peter, thanks for pointing out the new and unwanted US base in Iraq. I just read that the US was building the world's largest Embassy Compound in "Iraqi Kurdistan." I wonder it they're the same thing?

In a quick web search, failing to find an answer, I noticed that besides the "Green Zone" compound we built in Baghdad at the start of the current military occupation, the record holder was the US Embassy Compound in Pakistan.

James and I have discoursed here a bit on the history of US military occupations since WW II. Boils down to the US has never removed its military from any country it's occupied with the exception of Vietnam.

veritas semper vincit @103 linked blogpost notes that the US has 40,000 troops still occupying Germany. His (I presume) post is quite entertaining considering the severe seriousness of the topic.

Dis is a nice little country ya gotz heyah. Id be a shame if sumpin' bad was ta happen to it.

[Jul 15, 2018] Russia studying possible oil-for-goods deal with Iran - Novak

Jul 15, 2018 | uk.reuters.com

MOSCOW (Reuters) - Russian Energy Minister Alexander Novak said on Friday that a deal under which Russia would provide goods to Iran in exchange for oil is still possible.

Russia is studying all legal issues related to the possible deal, he said.

[Jul 15, 2018] JPM raised its forecast for Brent crude to average $70/bbl in both 2018 and 2019, up from an earlier forecast of $65 in 2018 and $60 in 2019

Jul 15, 2018 | seekingalpha.com

We expect continued price fluctuations within a wide $50-80/barrel range, with the strip gravitating lower over the medium-term and a wider Brent/WTI crude differential," JPM writes.

[Jul 14, 2018] Today orange fatty called out Germany for being captive to Russia.

The USA is "captive" of Canada (to use the terminology of trump), but don't seem to have much appreciation or respect for their position.
Jul 14, 2018 | peakoilbarrel.com

Hickory

x Ignored says: 07/11/2018 at 11:20 am
Looks like OPEC 14 peaked two years. Can they beat it?, perhaps by a small amount in a world without chaos.

Today orange fatty called out Germany for being captive to Russia. I'm pretty sure he was referring to German dependence on imported fossil energy from Russia.

As of 2015 Germany net energy imports are 64% of total [USA 12% for comparison]. If this means 'captive', then perhaps we should acknowledge that 11 of our top 13 trading partners are highly dependent on imported energy from either Russia or the big OPEC producers.

'Captives' so to speak. Better get used to that idea, and learn how to get along with others. Only Canada and Mexico aren't 'captives', but we don't look to good at being friends with them either.

[Jul 14, 2018] If the Bakken was to get and hold 1.4 million barrels a day the would need to complete around 1500 wells per year

Jul 14, 2018 | peakoilbarrel.com

coffeeguyzz x Ignored says: 07/13/2018 at 6:22 pm

Director's Cut out for May North Dakota just released.

New record production for both oil and gas with pretty low – 42 -- well completions reported as preliminary figures.

Guym x Ignored says: 07/13/2018 at 9:17 pm
How much was production?
coffeeguyzz x Ignored says: 07/13/2018 at 9:36 pm
38,583,489 bbl. 1,244,629 bbld. 96% from Bakken TF (1,189,982 bbld).

Gas – 71,881,378 Bcf. 2.3 Bcfd.

Oil increase is about 1.6% above previous month.

phatom x Ignored says: 07/13/2018 at 8:19 pm
The completed around 95 according to my data. The is lag in the data on confidential wells that will show up next month in the final data. Also if the Bakken was to get and hold 1.4 million barrels a day the would need to complete around 1500 wells per year.

[Jul 14, 2018] The only true measurement of market balance for oil going forward is global inventory level. Everything else is perhaps manipulation or guesses.

Jul 14, 2018 | peakoilbarrel.com

kolbeinh x Ignored says: 07/11/2018 at 6:11 pm

I managed to erase my own comment on this. And my comment was simple, the only true measurement of market balance for oil going forward is global inventory level. Everything else is perhaps manipulation or guesses.
Guym x Ignored says: 07/11/2018 at 7:31 pm
I agree, with all the intentional and unintentional confusion it stays confused. I stay confused trying to figure out what is confused. Inventory levels will be the only clear measure of what is happening. US inventories should not be dropping fast, as we are about the only country with increased production, but we dropped over 30 million last month. That's really not small potatoes, as commercial stocks are just a little over 400 million. Though, I think the US will be one of the last that would hit the danger zone.
Tita x Ignored says: 07/12/2018 at 3:57 pm
Good point. My intention was not to give more confusion. These are forecasts from eia and, I always like to remind this, they forecasted Brent averaging 105$ for 2015 in the STEO of October 2014. They never forecast big surplus or deficit.

I messed with the numbers of the STEO from 2018 to guess when the are reliable. Inventory levels are accurate for the US from the monthly report, which is 3 months old (april for July STEO). Other inventory levels are less accurate, but stock changes are reliable from 4-5 month data.

Global inventories increased in April (0.74 Mb/d) and May (1.14 Mb/d). This would be quite a change, as April would be a record inventory build since January 2017, and it would be followed by another record. This have to be confirmed later.

So, now I know what I will look for in these STEO.

Guym x Ignored says: 07/12/2018 at 4:35 pm
You gave data that I did not use before, and understand better, now. You did not confuse.
Eulenspiegel x Ignored says: 07/13/2018 at 3:55 am
How does this fit with production and consumption?

I thought we have still increasing consumption of about 1.5 mb/year, and production in April/May didn't jumped thad much – Opec flat and Permian already near it's pipeline bottleneck.

As much as I know, many storages are unknown, especially Opec / China. There are these satellite measurements, but there are additional deep storages.

Gathering all comsumption / raffinery input / production data would give an additional picture. Still not easy.

With 1mb/day surplus we should go soon into the next oil price crash to 30-40.

Permian price is then at 0-10$.

AdamB x Ignored says: 07/11/2018 at 11:14 am
Even if we haven't hit peak yet, the fact that production is likely to be going up by a snail's pace the next 3 years is a problem. If consumption just goes up 0.75% a year we need 600K extra a year. That seems like a big challenge to a layman like myself.
Timthetiny x Ignored says: 07/11/2018 at 12:57 pm
Well what will happen is that the price of oil will hit $150-$200 a barrel to ration demand.

Which will cause much pain and ruction and gnashing of teeth among the voters, but Europe has had those oil equivalent prices owing to taxation for quite some time and they manage high living standards. $200/bbl probably destroys 10 million a day in superfluous 'Becky driving by herself to the mall in a 3 ton SUV for no reason' kind of demand and incentivizes quite a bit of production.

The transition period will be moody for sure, but at $200/bbl, the amount of economic EOR targets in the US is somewhere in excess of 70 BBO from old conventional fields from the industry reports I have seen – its just not economic to do since there isn't enough CO2 available to flood them, so you need to use more expensive techniques which require very high prices (ethane flooding might be useful????). Worldwide its hundreds of billions. High prices that encourage us to use the resource wisely and not waste the goddamn stuff liberally would be a godsend, if we could quit wasting gigatons of plastic bullshit and 40% of our food – i.e. if everything made from oil was more expensive as well.

It would be painful economically, but Mad Max isn't coming our way. After 5 years of pain, we might actually finally get our shit together and research some goddamn alternatives.

Fernando Leanme x Ignored says: 07/11/2018 at 1:51 pm
I believe sugar cane ethanol is very competitive at $120 per barrel. This allows converting grass cattle grazing ground to cane. I believe soy and palm will also become very attractive crops. And I suspect countries like Haiti and Nicaragua will continue having riots.
kolbeinh x Ignored says: 07/11/2018 at 4:32 pm
Yes, I believe you are right. The future energy picture is complex, but authors writing books about this say sugar cane ethanol could have EROEI (energy return on energy invested) of up to 4. Even based on mechanised agriculture. And the big advantage of this crop is that it is not very nitrogen intensive, the biggest fertilizer, currently energy intensive when it comes to natural gas usage. Even when it comes to preindustrial crop rotation, the nitrogen intensive main food crops were often rotated with legume crops which were not nitrogen intesive in the hope to rebuild nitrogen content in the earth. So very long term, sugar cane ethanol is a superb type of renewable energy. (that is what I read, no expert).

Brazil has the biggest potential out there when it comes to size, and it is not inconceivable that they can cover much of domestic fuel demand with this outside aviation and possibly shipping (no need for diesel and gasoline ;-)). It would be in competition with food crops and concerns about deforestation, but still; a big potential there. Brazil is well off in a more renewable future btw, having loads of hydro power, wind power, in addition to biomass power (sugar cane the most promising).

[Jul 14, 2018] "Exxon has been pledg ing to pro duce more oil and gas for years, but its out put of about four mil lion bar rels a day is no higher to day than it was af ter its merger with Mobil Corp. in 1999

Jul 14, 2018 | peakoilbarrel.com

Boomer II x Ignored says: 07/13/2018 at 6:11 pm

From the WSJ Exxon story.

"[Exxon's] approach is a gam­ble in a new era of en­ergy break­throughs such as frack­ing and elec­tric ve­hi­cles. Many of Exxon's com­peti-tors are trans­form­ing their busi­nesses to move away from oil ex­plo­ration, and have be­gun to spend care­fully and di­ver­sify into re­new­able energy ."

"'Most in­vestors like Exxon, but they like other com­pa­nies bet­ter,' said Mark Stoeckle, chief ex­ec­u­tive of Adams Funds, which owns about $100 mil­lion in Exxon shares. 'The mar­ket is not will­ing to re­ward Exxon for spend­ing to­day in hopes that it will bring good re­turns to­mor­row.'

"Exxon has been pledg­ing to pro­duce more oil and gas for years, but its out­put of about four mil­lion bar­rels a day is no higher to­day than it was af­ter its merger with Mo­bil Corp. in 1999. Even if Exxon suc­ceeds in dou­bling last year's earn­ings of $15 bil­lion (ex­clud­ing im­pair­ments and tax re­form im­pacts) by 2025, as Mr. Woods vowed in his eight-year spend­ing plan, it would still be mak­ing far less than in 2008, when it set what was then a record for an­nual prof­its by an Amer­i­can cor­po­ra­tion, at $45 bil­lion .

"Exxon's frack­ing prospects in the Per­mian basin in West Texas and New Mex­ico, de­vel­oped by its XTO unit, re­main among its most prof­itable op­por­tu­ni­ties, the com­pany says. Still, its U.S. drilling busi­ness has lost money in 11 of the last 15 quar­ters."

Boomer II x Ignored says: 07/13/2018 at 3:46 pm
The Wall Street Journal has a big article on Exxon. I won't bother with a link because you won't be able to see it if you aren't a subscriber.

Basically it says we've seen peak Exxon.

[Jul 14, 2018] The energy cliff approaches: World Oil Gas Discoveries Continue To Decline

Jul 14, 2018 | www.zerohedge.com

shortonoil -> SRSrocco Sun, 07/08/2018 - 16:00 Permalink

Hi Steve, this is exactly what we have been talking about for the last 8 years. To make matters worse there seems to be a completely irrational belief that Shale will save the day. Outside of the fact that shale is not processable without heavier crude, and it is at best energy neutral, and probably negative, it is also long term unaffordable. There are 1.7 million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to be replaced to just keep production even. That will be $6.2 trillion even if done on the cheap. $6.2 trillion is equal to the total cost of all the finished product that will be consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales revenue to produce 5 years of oil is just not going to happen!

There seems to be a black out on this terrible situation. Some of that may be just plain ignorance, but I suspect that the main reason is that it is politically unspeakable. For that reason nothing is being spoken. As I have been saying for some time no one should expect big oil, big government, or big anything to come riding to the rescue. The individual is now completely on their own. Chose your options with discretion.

BW

http://www.thehillsgroup.org/

SRSrocco -> shortonoil Sun, 07/08/2018 - 16:55 Permalink

shortonoil,

Agreed. The U.S. Shale Oil Ponzi Scheme will likely begin to disintegrate within the next 1-3 years. Already, the Permian oil productivity per well has peaked.

Then when the next Shale Oil ENRON event takes place... watch as the dominos fall.

steve

Zen Xenu -> SRSrocco Sun, 07/08/2018 - 19:48 Permalink

@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices.

Once cheap credit dries up and the previous debts are unable to be paid by drilling new wells, the entire scheme falls apart.

Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.

Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will catch up with a vengence. Rising interest rates will be the catalyst. Rising oil prices only prolong the increasing debt.

MrNoItAll -> SRSrocco Sun, 07/08/2018 - 21:21 Permalink

Didn't the EIA publish something not long ago stating their concerns that we could see oil shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out and stated that without more investment, we would likely see oil shortages by 2020. And then at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which of course is not going to happen. It has been a long slow grind since 2008 to get to this point, but from here on out I anticipate that things will start unraveling at an ever faster pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some other world leader comes out and says we are running short on energy. Instead it will be Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.

Cloud9.5 -> Anonymous_Bene Mon, 07/09/2018 - 07:23 Permalink

This is a synopsis of the German Army study produced in 2010. https://www.youtube.com/watch?v=ZyUe7w1gDZo

If you want the English translation of the study in its entirety, it can be found here: https://www.permaculturenews.org/files/Peak%20Oil_Study%20EN.pdf

The mitigation section of the study was most telling. It simply stated that local sustainable economies would replace the modern era. These economies included local food production and energy production. As this process unfolds, I simply do not see how a high rise is going to remain habitable.

EddieLomax -> JamcaicanMeAfraid Mon, 07/09/2018 - 04:33 Permalink

Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more in that it earned in the previous 7 years (mining in general), so more investment wouldn't have been coming in the US anyway - the price wasn't high enough to justify it.

Worldwide we are going to see some almightly crunch, whether it will arrive after 2020 will be seen. Ironically it might save Trump anyway if the world is seen to be beset by a oil supply crunch since its hard to blame that on him.

Chief Joesph Sun, 07/08/2018 - 13:02 Permalink

The U.S. needs to get off its dead ass and start developing better batteries, solar power, and other alternative energy sources. This was talked about in 1973, during the Oil Embargo days, and its just astonishing the U.S. has done little since to ween itself off of oil. And now we now have a tariff against Chinese made solar panels. DUH!!! How dumb can you get?

El Vaquero -> Chief Joesph Sun, 07/08/2018 - 13:31 Permalink

Look at the energy density of those power sources. You'll never run an industrial civilization off of them. Electric cars may be great for zipping a couple of people around town from day to day, but you're never going to run the large mining and shipping equipment needed for our society. If you want to do that, you're going to have to develop viable breeder reactors and the technology to manufacture liquid fuels with that energy - and this is doable.

bshirley1968 -> El Vaquero Sun, 07/08/2018 - 14:10 Permalink

Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and utilized by the modern industrial society. Nothing......

What needs to happen right now is a steady rise in prices that will condition our population to start learning to do with less cheap, easy energy. We have got to curb usage to give society a chance to begin to learn another way.

The major obstacle to doing this responsible, rational action? The egregious, criminal banking system that has gotten the world awash in debt to feed their greed. Any cut back in the use of energy will destroy the economy and their gravy train.

[Jul 11, 2018] Why Trump's Iran Isolation Plan May Backfire by Ron Paul

Notable quotes:
"... President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil? ..."
"... Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never. ..."
"... Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond. ..."
"... Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies. ..."
"... In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD. ..."
Jul 11, 2018 | www.unz.com

... ... ...

President Trump is finding that his threats and heated rhetoric do not always have the effect he wishes. As his Administration warns countries to stop buying Iranian oil by November or risk punishment by the United States, a nervous international oil market is pushing prices ever higher, threatening the economic prosperity he claims credit for. President Trump's response has been to demand that OPEC boost its oil production by two million barrels per day to calm markets and bring prices down.

Perhaps no one told him that Iran was a founding member of OPEC?

When President Trump Tweeted last week that Saudi Arabia agreed to begin pumping additional oil to make up for the removal of Iran from the international markets, the Saudis very quickly corrected him, saying that while they could increase capacity if needed, no promise to do so had been made.

The truth is, if the rest of the world followed Trump's demands and returned to sanctions and boycotting Iranian oil, some 2.7 million barrels per day currently supplied by Iran would be very difficult to make up elsewhere. Venezuela, which has enormous reserves but is also suffering under, among other problems, crippling US sanctions, is shrinking out of the world oil market.

Iraq has not recovered its oil production capacity since its "liberation" by the US in 2003 and the al-Qaeda and ISIS insurgencies that followed it.

Last week, Bloomberg reported that "a complete shutdown of Iranian sales could push oil prices above $120 a barrel if Saudi Arabia can't keep up." Would that crash the US economy? Perhaps. Is Trump willing to risk it?

President Trump's demand last week that OPEC "reduce prices now" or US military protection of OPEC countries may not continue almost sounded desperate. But if anything, Trump's bluntness is refreshing: if, as he suggests, the purpose of the US military – with a yearly total budget of a trillion dollars – is to protect OPEC members in exchange for "cheap oil," how cheap is that oil?

At the end, China, Russia, and others are not only unlikely to follow Trump's demands that Iran again be isolated: they in fact stand to benefit from Trump's bellicosity toward Iran. One Chinese refiner has just announced that it would cancel orders of US crude and instead turn to Iran for supplies. How many others might follow and what might it mean?

Ironically, President Trump's "get tough" approach to Iran may end up benefitting Washington's named adversaries Russia and China – perhaps even Iran. The wisest approach is unfortunately the least likely at this point: back off from regime change, back off from war-footing, back off from sanctions. Trump may eventually find that the cost of ignoring this advice may be higher than he imagined.

Vidi , July 10, 2018 at 6:05 am GMT

Trump may eventually find that the cost of ignoring [the advice to back off from Iran] may be higher than he imagined.

Perhaps he's counting on not being President by then. Another case of IBGYBG (I'll be gone, you'll be gone), an attitude that seems to be infecting bankers, Wall Street, and the rest of the U.S. élite lately. A cataclysm is coming, and they can see it.

mark green , July 10, 2018 at 7:01 am GMT
Why is Zio-America treating Iran with such hostility?

Iran and Israel are locked in a vicious cold war. Their animosities date back to mythical antiquity. One alleged episode is even celebrated in the Jewish celebration of 'Purim'.

Take a look at the breathtaking insight that Gilad Atzmon has to offer about Purim:

https://www.counterpunch.org/2007/03/03/from-esther-to-aipac/

In any case, Iran and Israel's antipathies for one another shouldn't concern superpower America. Except that it does.

Like American television, Washington happens to be Israeli-held territory. Haven't you heard?

This is why Zio-Washington invariably sides with Israel in all of its disputes, even when 1) Israel is the aggressor, 2) even when Israel is slaughtering powerless civilians who are protesting their subjugation, and 3) even when US interests are not at stake or even in play. And this uniform deference from Washington is thoroughly bipartisan. It is 'business as usual'. It's basically unanimous. Both Parties. No dissent.

Many just call it 'US Mideast policy'. Ironclad. 'Unshakable'. But don't laugh or smirk. Doing so might be seen as 'anti-Semitic'.

Exactly how traditional 'US Mideast policies' benefit the average American however remains a mystery. Many of these questionable policies are never critically examined in the open – at least not the big ones involving that 'special relationship' with you-know-who. Never.

These rigid policies help explain how Crypto-Israelis in America – using Washington as their proxy – have successfully brought the US into Israel's cold war against Iran.

Zionist operatives have not only orchestrated the decades-long freeze of billions of dollars in Iranian assets that belong to the Iranian people, but they have launched a global (and crypto-Zionist) 'Boycott, Divestment and Sanctions' campaign against the relatively peaceful nation of Iran.

Iran's crime? That nation's alleged 'sponsorship of terrorism' in support of the Palestinian struggle against Zionist occupation, as well as other anti-Zionist resistance movements in Lebanon, Syria and beyond.

Yet it is Israel that is foremost occupying power in that region and it is Israel that is the expanding nuclear power. Meanwhile, the Zionist-lead BDS campaign against Iran is nothing less than a full-blown economic war. At the same time, Israel benefits from unconditional and continuous US subsidies.

Politicians who dare question this phenomena – or who wander off the Zionist plantation in Washington – tend to disappear. Rapidly. Journalists, too.

In no small way, Israel sees its mission to dominate the region and expand its borders as a religious duty. Destiny. This puts Israel in a class by itself. And unlike its neighbors (including Iran) Israel has nuclear WMD.

Due to Israeli influence here, Americans are not only actively supporting various Zionist war efforts, but they are also paying billions more for their gasoline since Zionists have managed to prohibit the purchase Iranian oil throughout the West. These economic 'choices' are what Americans unwittingly make – even though the 'average Joe' remains totally unaware of them.

Indeed, even though Iran wants to be a trading partner with America and bring its oil onto the world market, Zio-Washington says 'NO!' US consumers be damned. The Iranian people be damned.

This is not the first time that US economic interests have taken a back seat to Israel's. Please recall the 1973 Arab-Israeli war, Zio-Washington's intervention on behalf of Israel during that conflict, the ensuing Arab oil embargo, and the disastrous recession that followed.

But Zio-America never turned it back on Israel, even though American citizens never had the opportunity to determine their allies or policies one way or another. US support of Israel is mandatory. It's been this way since LBJ.

Today, Israel is maneuvering Zio-Washington to do to Iran what it did to Iraq, Libya and Syria; namely, spread destabilization and impose 'creative destruction' upon all nations that pose any long-term threat to the Zionist State.

[Jul 10, 2018] We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average.

Those suckers from Sanford and Bernstein again try to push thier view that shale oil has great potential instead of potential to bury even more money in the sand. production of shale oil includes production of a parallel stream of junk bonds.
My impression is the EROEI of shale oil soon might become negative. It was around Oil shale: 1.5:1 to 4:1 in 2011 by some estimates Energy Returned on Energy Invested (EROEI) for Shale Oil and Shale Gas which is trun extracted it from Richard Heinberg, Searching for a Miracle: 'Net Energy' Limits & the Fate of Industrial Society .
Notable quotes:
"... statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch. ..."
"... "We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens." ..."
Jul 10, 2018 | oilprice.com

"Investors who had egged on management teams to reign in capex and return cash will lament the underinvestment in the industry," the analysts wrote . "Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008."

... ... ...

Of course, for many, this is a problem for another day. The oil market is arguably facing a supply crisis right now. Until recently, the oil market assumed a loss of about 0.5 mb/d from Iran because of U.S. sanctions. But statements from the U.S. government about "zero tolerance" towards Iran could mean that those losses will end up being much higher. Just by shifting the supply outages from 0.5 to 1 mb/d would translate into an oil price increase of about $8 to $9 per barrel, according to Bank of America Merrill Lynch.

"We estimate that every million b/d shift in [supply and demand] balances would push the oil price by $17/bbl on average. So based on those assumptions, we estimate zero Iran exports could push oil up by $50/bbl if Saudi caps out. We expect in this game of chicken, someone will blink before that happens."

In other words, if Saudi Arabia is unable to plug the deficit, the U.S. would likely have to back down on its "zero tolerance" policy towards Iran. The oil market is too tight, and the supply gap would be too large. Cutting Iran exports by that much, in an increasingly tight oil market, would send prices skyrocketing, something that the Trump administration probably won't be able to stomach. If Trump proceeded, a price spike of that magnitude would lead to a meltdown in demand.

By Nick Cunningham of Oilprice.com

[Jul 09, 2018] THE ENERGY CLIFF APPROACHES World Oil Gas Discoveries Continue To Decline Zero Hedge Zero Hedge

Jul 09, 2018 | www.zerohedge.com

THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

by SRSrocco Sun, 07/08/2018 - 11:25 17 SHARES

By the SRSrocco Report ,

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from its peak in 2014. If the world oil industry doesn't increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:

In the article, All-time low for discovered resources in 2017, Rystad reports , it stated the following:

"We haven't seen anything like this since the 1940s," says Sonia Mladá Passos, senior analyst at Rystad Energy. "The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) - compared to over 50% in 2012." According to Rystad's analysis, 2006 was the last year when reserve replacement ratio reached 100%.

The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012. However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006. So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.

As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most. In the EIA's International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:

In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production. However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017. So, even though more money is being spent, the world isn't finding much more new oil.

I believe we are going to start running into serious trouble, first in the U.S. Shale Energy Industry, and then globally, within the next 1-3 years. The major global oil companies have been forced to cut capital expenditures to remain profitable and to provide free cash flow. Unfortunately, this will impact oil production in the coming years.

Thus, the world will be facing the Energy Cliff much sooner than later.

Check back for new articles and updates at the SRSrocco Report . Tags Business Finance Environment

Comments Vote up! 6 Vote down! 0

He-He That Tickles Sun, 07/08/2018 - 12:44 Permalink

Guess they better sell what's left really, really expensively.

GoinFawr -> He-He That Tickles Sun, 07/08/2018 - 13:17 Permalink

Yeah tHis article is ridiculous, resident ZH self-purported Mensa members like Tmos' have proven beyond any doubt that 'abiotic oil' replenishes the world's supply of easily accessed hydrocarbons every fifteen minutes or so, regardless of increasing consumption rates; indeed regardless of any veritable facts whatsoever.

ThorAss -> GoinFawr Sun, 07/08/2018 - 15:11 Permalink

Worked by whole life in the oil business. Depletion is real. Abiotic oil replenishment is Magic unicorns dancing on rainbows. Oil won't run out ever, but the energy required to extract the oil will make remaining oil reserves uneconomic at some point.

Zen Xenu -> ThorAss Sun, 07/08/2018 - 19:35 Permalink

Well said. Agreed.

DanDaley -> ThorAss Mon, 07/09/2018 - 06:17 Permalink

Hence Colin Campbell's book The End of Cheap Oil .

ZIRPdiggler -> ThorAss Mon, 07/09/2018 - 06:27 Permalink

It went from the cost of one barrel to extract 100 back in the 19th century, to present day 5 barrels.

Sid Davis -> GoinFawr Sun, 07/08/2018 - 16:12 Permalink

So I guess in your experience, oil wells don't go dry, ever.

But I wonder, why do you think the Saudis pump water into oil wells or the Mexicans pump in Nitrogen?

GoinFawr -> Sid Davis Sun, 07/08/2018 - 18:03 Permalink

"So I guess in your experience, oil wells don't go dry, ever."

indeed, regardless of any veritable facts whatsoever...

Thanks for comin' out!

Shemp 4 Victory -> GoinFawr Sun, 07/08/2018 - 20:33 Permalink

Good sarcasm is an underappreciated art form.

Victor999 -> GoinFawr Mon, 07/09/2018 - 01:21 Permalink

Strange that the oil industry does not agree with you. And it's strange that reserves all over the world are not stable but decreasing. Your Mensa idol is full of shit.

Adahy -> Victor999 Mon, 07/09/2018 - 02:47 Permalink

*whoosh* Right over the head.
I know /s is more difficult to detect with only text but damn, he was pretty obvious in his sarcasm.

ebear -> Adahy Mon, 07/09/2018 - 08:16 Permalink

"...he was pretty obvious in his sarcasm."

Plain as day.

Slomotrainwreck -> GoinFawr Mon, 07/09/2018 - 06:41 Permalink

I was unaware of abiotic oil. Looked it up. Seems like a reverse shale oil scam to me. Not much profit motive to either explore or drill.

I'm out.

[Jul 09, 2018] Chinese Refiner Halts US Oil Purchases, May Use Iran Oil Instead

Jul 08, 2018 | www.zerohedge.com
With the US and China contemplating their next moves in what is now officially a trade war, a parallel narrative is developing in the world of energy where Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the US and China, even as Trump demands all US allies cut Iran oil exports to zero by November 4 following sanctions aimed at shutting the country out of oil markets.

Concerned that the situation will deteriorate before it gets better, Asian refiners are moving swiftly to secure supplies with South Korea leading the way. Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-China tit-for-tat on trade.

"As South Korea's economy heavily relies on trade, it won't be good for South Korea if the global economic slowdown happens because of a trade dispute between U.S and China," said Lee Dal-seok, senior researcher at the Korea Energy Economic Institute (KEEI).

Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg , slamming Trump's government as a "gang of hoodlums", with officials vowing retaliation, while the chairman of Sinochem just become China's official leader of the anti-Trump resistance, quoting Michelle Obama's famous slogan " when they go low, we go high. " Standing in the line of fire are U.S. crude supplies to China, which have surged from virtually zero before 2017 to 400,000 barrels per day (bpd) in July.

Representing a modest 5% of China's overall crude imports, these supplies are worth $1 billion a month at current prices - a figure that seems certain to fall should a duty be implemented . While U.S. crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date.

And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even remotely close to crying uncle, industry participants expect the tariff to be levied, a move which would make future purchases of US oil uneconomical for Chinese importers.

"The Chinese have to do the tit-for-tat, they have to retaliate ," said John Driscoll, director of consultancy JTD Energy, adding that cutting U.S. crude imports was a means "of retaliating (against) the U.S. in a very substantial way".

In an alarming sign for Washington, and a welcome development for Iran, some locals have decided not to see which way the dice may fall.

According to Japan Times , in a harbinger of what's to come, an executive from China's Dongming Petrochemical Group, an independent refiner from Shandong province, said his refinery had already cancelled U.S. crude orders .

"We expect the Chinese government to impose tariffs on (U.S.) crude," the unnamed executive said. " We will switch to either Middle East or West African supplies ," he said.

Driscoll said China may even replace American oil with crude from Iran. " They (Chinese importers) are not going to be intimidated, or swayed by U.S. sanctions."

Oil consultancy FGE agrees, noting that China is unlikely to heed President Trump's warning to stop buying oil from Iran. While as much as 2.3 million barrels a day of crude from the Persian Gulf state at risk per Trump's sanctions, the White House has yet to get responses from China, while India or Turkey have already hinted they would defy Trump and keep importing Iranian oil. Together three three nations make up about 60 percent of the Persian Gulf state's exports.

... ... ...

beemasters -> divingengineer Sun, 07/08/2018 - 19:50 Permalink

"Meanwhile, Chinese state media has unleashed a full-on propaganda blitzkrieg, slamming Trump's government as a "gang of hoodlums""

And how's that a propaganda?
Oh, Trump was just following Bibi's order on Iran issue. Got it.

DingleBarryObummer -> 2banana Sun, 07/08/2018 - 20:11 Permalink

Did you even READ the article?

Yes it looks like he did.

Under pressure from Washington, Seoul has already halted all orders of Iranian oil, according to sources, even as it braces from spillover effects from the U.S.-China tit-for-tat on trade.

[Jul 06, 2018] Saudi amount on infill drilling almost guarantee a sharp decline

Jul 06, 2018 | peakoilbarrel.com

Mushalik x Ignored says: 07/04/2018 at 9:08 am

This is about Trump's tweet to Saudi Arabia

5/7/2018
Saudi Arabia was supposed to pump almost 14 mb/d in 2018
http://crudeoilpeak.info/saudi-arabia-was-supposed-to-pump-almost-14-mbd-in-2018

Guym x Ignored says: 07/04/2018 at 9:38 am
Expecting SA to help supply the World's needs is perhaps going off the deep end. It's their bread and butter for years to come. As years pass, they become more aware that those years are limited. This is not the 1970's, it's 2018. They will supply what is profitable for them, and wasting it early, doesn't sound real smart, does it? If we offered them massive support to develop their nuclear capabilities, it would probably entice them. Or, jump out of the pot, and into the frying pan. Iran May have more capacity for new oil.
eduard flopinescu x Ignored says: 07/04/2018 at 9:58 am
This graph shows that it was supposed to peak in 2018
http://crudeoilpeak.info/wp-content/uploads/Saudi-Arabia_oil-production_1970-2030_IEA-actual.jpg
Kolbeinh x Ignored says: 07/04/2018 at 12:12 pm
If I have understood this correctly. When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields, so that the oil price can stay low. And then there is the extra gain in extra barrels to consider as a result of the investments that adds to ultimate recovery at each field. The gain from extra barrels could make up for a mediocre return on investment in some cases and a questionable one in other cases. Given a relatively low oil price assumption.

Why would they do that? Keeping the facilities as they are for mature fields, accepting only small investments where they are highly profitable, limiting infill drilling to the best locations, let the oil production fall and hope for prices to rise would be a superior solution for them, would it not? Why rush investments in mature oil fields?

Ron Patterson x Ignored says: 07/04/2018 at 12:23 pm
When most of their fields are mature, the option they have is to invest (almost overbuild) in facilities foremost to treat and inject the steadily higher volume of water to keep oil production steady and at the same time overinvest in infill drilling to keep the volume rising. All this to sustain or even increase oil output from mature fields,

Well no, it does not usually increase production, it just drastically reduces the decline rate. For instance, a very mature field may have a natural decline rate of 6 to 8% per year. With infill drilling of horizontal wells along the top of the reservoir, they may reduce that decline rate to 2% per year.

so that the oil price can stay low.

No, that's not why they are doing it. They are doing it to maintain their annual production. Some do increase production but with oil from new fields. These new fields, however, will have a much lower URR and will start to decline after only a few years. All the giant and supergiant field have already been discovered.

Kolbeinh x Ignored says: 07/04/2018 at 12:48 pm
Ok, thanks!

The "so that the oil price can stay low" was a well hidden irony from my part. But you have a point, they want to keep their long term customers supplied, not losing face in OPEC and their long term allies happy. They stretch to keep everyone happy.

[Jul 06, 2018] A field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased.

Jul 06, 2018 | peakoilbarrel.com

Michael B. x Ignored says: 07/04/2018 at 7:18 am

A field is creamed by massive infill drilling with horizontal wells that skim the very top of the reservoir. The decline rate is the[n] drastically reduced while the depletion rate is drastically increased. Things will go just great until the water hits those horizontal wells at the top of the reservoir. Then production will drop like a rock.

I assume this is the money quote. These methods comprise the "game changer" that scuttled peak oil predictions circa 2005.

By demurring a prediction as to when the stone might–will!–drop, you're acknowledging the deplorable state of the data. This should give us pause. We might call this the New Peak Oil Reticence.

Let's grant that what you say is true (I'm certainly not qualified to refute it). If you know it (that is, that the rock will drop), then "they" know it, and by "they" I mean those who are in the business of developing these "creaming" methods. They must know it.

So what the fuck are they thinking?

eduard flopinescu x Ignored says: 07/04/2018 at 9:51 am
I think only the big fields offer a cushion, in a way or the other, in the end it all depends a lot on Ghawar. Matt Simmons was right about that.

As I see it in a pyramid scheme if a big player suddenly wants to get out their money it's over.

George Kaplan x Ignored says: 07/04/2018 at 9:59 am
In IOCs they are mostly thinking how can I satisfy my boss and/or the stockholders enough in the next quarterly report to keep my job.

[Jul 06, 2018] The possibility of Seneca cliff in oil production

Jul 06, 2018 | peakoilbarrel.com

Ron Patterson x Ignored says: 07/04/2018 at 8:18 pm

No one producing country is looking at the global problem. They are only concerned with their own country and the problems at home. Most are old men who realize that they will be long dead if there is ever a catastrophe. And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse.

But the point is, the oil barons of each individual country, are not even remotely concerned with the collapse of civilization as we know it. They believe God, or Allah, or human ingenuity, will simply not allow that to happen.

Michael B x Ignored says: 07/05/2018 at 5:10 am
"And most, like the contributors to this blog, believe that there will never be a catastrophe. They believe that renewables, or fusion energy, or God, human ingenuity, or something else will save us from any type of collapse."

But doesn't that require, like, planning? Plenty of planning?

Ron Patterson x Ignored says: 07/05/2018 at 7:22 am
Of course not. If someone else, or something else, is going to save you, you just sit back and let it happen. You do not need to do anything.
Guym x Ignored says: 07/04/2018 at 8:10 am
I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.
Ron Patterson x Ignored says: 07/04/2018 at 8:47 am
Yes, I agree with you on Dr. Minqi Li's paper. I am not sure, however, that the Permian will show enough yearly increase to hold off the peak until 2023.

[Jul 06, 2018] The possibility of Seneca cliff: Russia is certainly being creamed. The massive infill is visible from satellites and they haven't found/opened anything new of size

Jul 06, 2018 | peakoilbarrel.com

ProPoly 07/04/2018 at 10:28 am

More money now.

Russia is certainly being creamed. The massive infill is visible from satellites and they haven't found/opened anything new of size, yet have outlasted what everyone (including them) calculated would be the start of their decline.

Russia needs the oil revenue badly. But is their ultimate decline going to look like China? Very likely.

Hightrekker 07/04/2018 at 2:20 pm
Only Russia has more resources, a much smaller population, imports little, and is better educated.

Plus (not a given), global warming will ring some benefit. China doesn't have a chance (if one is biologist looking at it).

[Jul 06, 2018] Seneca cliff in shale oil may be closer that we think

Jul 06, 2018 | peakoilbarrel.com

ProPoly x Ignored says: 07/04/2018 at 10:21 am

The implied increase in the Permian would be staggering. US onshore outside of fracking is in terminal decline. US GOM is peak/decline. Eagle Ford is peak/decline. Bakken is close to peak. Eagle Ford and Bakken have very high existing production decline rates, meaning they will fall like a brick if drilling moves to the Permian.

There isn't anything new beyond the Permian. People have looked. No more plays.

And after covering all of that and its own existing production decline (not as extreme as the other plays but large in absolute number), the Permian is supposed to add millions of barrels per day?

I don't think that adds up no matter what the price of oil is.

Hightrekker x Ignored says: 07/04/2018 at 2:37 pm
The shale industry has more debt than Venezuela and Saudi Arabia combined

https://imgur.com/a/t7ulB

[Jul 06, 2018] While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will struggle to pump more than 1 million b/d of additional output.

Jul 06, 2018 | peakoilbarrel.com

Energy News x Ignored says: 07/05/2018 at 2:42 pm

2018-07-05 (Platts) While Saudi Aramco CEO Amin Nasser told Platts recently that "maximum sustainable production" was 12 million b/d, industry experts believe Saudi Arabia will struggle to pump more than 1 million b/d of additional output.

Platts Analytics says even if Saudi Arabia produces close to 11 million b/d it would be running its system at stress levels.
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/070518-factbox-anatomy-of-saudi-arabias-crude-oil-capabilities ?
OPEC June oil production (Platts) https://pbs.twimg.com/media/DhWBRxDXcAAlaqq.jpg

Guym x Ignored says: 07/05/2018 at 3:18 pm
Yeah, I think that is pretty much what Ron and George have been saying. It is why all these drops in production, and projected production that will not get out of the ground has to cause demand to exceed supply within the next year by a substantial amount. Throw in Iran's sabre rattling over the Homez, and oil prices should be through the roof. That it is not, is mainly complacency built up over the past four years from the inventory overage. As Scarlet O'Hara said, "After all tomorrow is another day".

[Jul 06, 2018] The Aramco IPO may never happen.

Jul 06, 2018 | peakoilbarrel.com

dclonghorn x Ignored says: 07/05/2018 at 1:27 pm

MSNBC announced that the Aramco IPO may never happen. MSNBC didn't say why, however I suppose those reserves that the Saudis have touted for so long could be very difficult to have verified based on SEC rules. I think that much of the last two years of prep for their IPO has been shopping for a exchange that would allow them to get their stock issued without drastically revising their prior reserve disclosures.

You can also look at this development as an indication that the above discussed "rock" may have already dropped.

[Jul 06, 2018] Iran Threatens To Close the Strait of Hormuz naked capitalism

Notable quotes:
"... On the Psychology of Military Incompetence ..."
Jul 06, 2018 | www.nakedcapitalism.com

The Rev Kev , July 5, 2018 at 2:13 am

I think that the potential threat of what happens if there is a hot war are more extensive than just having the Strait of Hormuz being closed. If you look at that map you can see that Saudi Arabia is just across the Strait. And as luck would have it, Saudi Arabia's oil fields are mostly in the east which means that they are within close missile range of Iran. Nice oil fields you have there Saudi Arabia. Shame if something happened to it. The United Arab Emirates are also within missile range as well. If both countries think that Patriot batteries will protect them then they must have been disillusioned to find that those Patriots couldn't even defend against wonky Houthi missiles.
Then there is the fact that Iran shares a border with Pakistan and Afghanistan. Remember how the CIA shipped all those anti-tank guided missiles (ATGM) and ManPads to the Syrian Jihadists via countries like Saudi Arabia? Be a real shame if captured stock got passed on to the Taliban via all those borders and started targeted US/Coalition forces in Afghanistan. Just these two possibilities show how Iran has a whole range of options to use if it came to a military confrontation. And it should be remembered. If a US/Coalition could not successfully occupy Iraq with a population of 37 million, then how can Iran with a population of 80 million be occupied?
Another factor is that even if a US/Coalition managed to somehow suppress all those missiles the Iranians are using to guard those Straits, you would never be sure that you got them all. Who really want to risk their oil tankers going down those Straits and wanting to risk that bottleneck beig turned into a flaming sea? The trouble there is no way that there would be a quick campaign possible with everybody home by Christmas. This has the potential of still being fought during the 2020 US elections and I do not think that the US establishment wants to risk that one. What they do want is to strangle Iran economically and turn the place into one of grinding poverty but if pushed too far may go the Sampson option.

jCandlish , July 5, 2018 at 3:31 am

Mines.

The straight could be mined, and probably already is.

Colonel Smithers , July 5, 2018 at 4:30 am

Thank you.

Local kids could also be trained to fire rockets across the water. The straits are not straight and cut into Iran, so there's a good vantage point for Iran.

Steve H. , July 5, 2018 at 7:28 am

> probably already is.
>> China is still officially stating that it will not end its Iranian oil imports and operations.

China's investment of billions into the deep port of Gwadar should not be discounted. While China has ceded the ocean surface to the US navy, the wei qi way is to surround and not engage directly. By now the Gulf of Oman should be a sensory organ for information critical to Iran, and passive systems are much harder to detect & destroy.

We're now three years out from Qiao Liang saying China "thinks that Washington will not fight Beijing for the next ten years". China doesn't want the fight (and I mean high explosives, not 'fighting for') yet, but they've been preparing. And let us not forget the rooster tails on the American fleet fleeing the Persian Gulf in October 2015 when Russia launched cruise missiles at Syria. That was three months after the 'One Belt, One Road' speech.

While the Saud's are working out their family disputes they cannot afford to have the petrodollar disabled. But the US is materially capable of weathering energy disruptions better than the EU, which would become even more dependent on Russia. Long term, the petrodollar is gone and climate migrations are coming, so the when of Fortess America could depend on relative and not absolute 'cui bono, ciu malo'.

tldr: the fight is inevitable, there's more than two in the ring, and there's no referee.

rd , July 5, 2018 at 12:04 pm

I doubt if it is mined at this time, but mines would be a logical way to quickly shut the Strait down. A couple of small fast ships dropping mines at night could shut it down very quickly. They could drop mines along the far shore which would force ships towards the Iran side where they would be vulnerable to shore-based anti-ship missiles.

BTW, the standing NATO minesweeping group is three ships (two Lithuanian and one British). Historically minesweeping is one of the roles carried out by other countries that the US is currently working hard to alienate. https://en.wikipedia.org/wiki/Standing_NATO_Mine_Countermeasures_Group_1

The US Navy has minesweeping ships stationed in Bahrain. https://en.wikipedia.org/wiki/Avenger-class_mine_countermeasures_ship

Mine sweeping ships generally are not heavily armored to avoid magnetic and acoustic signatures that can trigger mines. So they can struggle in contested waters and would be very vulnerable to anti-ship missiles.

"Rouhani, considered by European politicians to be a reformist, appears to be showing a hardline streak that is nearer the strategy of the country's supreme leader, Ayatollah Khamenei. "

Everybody becomes a hardliner when faced with an existential threat, which Trump's threats are now creating for Iran.

Antifa , July 5, 2018 at 12:59 pm

There's no need to sink any oil tankers to stop all oil shipping. Those tankers don't sail without full insurance for the cargo, and no maritime insurer will back shipping through the Strait of Hormuz while the Iranians are on the warpath. Hence, no oil tanker.

rd , July 5, 2018 at 2:03 pm

That is why a few mines would be very effective. All oil shipping would cease immediately. Because mines can be redeployed very easily, including by air or fishing boats, insurers would probably not be assuaged by naval assurances that mines have been swept.

Lambert Strether , July 5, 2018 at 3:31 pm

"What's mined is minded, and what's yours is negotiable."

Bill Smith , July 5, 2018 at 5:22 pm

In the 1980's when the Iranians mined the Straits the tankers still moved. What was the insurance deal then? Did it the US pick it up for that part of the trip?

Redlife 2017 , July 5, 2018 at 4:11 am

"If a US/Coalition could not successfully occupy Iraq with a population of 37 million, then how can Iran with a population of 80 million be occupied?"

Iran is also mostly Persian. Yes, there are Arabs, Armenians, Baluchis, etc., but the vast majority are Persian and are proud to be Persian. Unlike Iraq, where you have a country with 3 groups you can play off each other.

I visited Iran over 5 years ago and was able to speak to some regular Iranians (English is not uncommon amongst men and women). They will fight to the last man, woman, and child if anyone came into their country. And that's what the secular ones who hate their government say.

Every town has lamppost flags showing the pictures of all the young men who died in the Iran-Iraq War. It was humbling to see the generational devastation wrought on that country. Even the youth view that war as a world war, since people from over 25 countries were found to be fighting on the Iraq side ( https://en.wikipedia.org/wiki/Iran%E2%80%93Iraq_War – Remember the Soviet Union was ALSO on Iraq's side!). They faced destruction and survived. They view themselves as an ancient, sophisticated people as well as the greatest survivors in the world (all with good reason as they are an amazing people with a rubbish government).

I do not see this ending well if the US thinks they can put the Iranians into a corner and get compliance. It is an amazingly ahistorical understanding of the geopolitics of Iran. These are the people we should be allying with not Saudi Arabia. But this is the same group who think blundering into Iraq or Syria was a good idea, so I really can't be surprised.

Colonel Smithers , July 5, 2018 at 4:27 am

Thank you, Kev.

Just to add that the people living above the main Saudi oil fields, Eastern Province, are mainly Shiites. Shiites are also to be found in the south along the ill defined border with Yemen. Both communities are disaffected and have been for decades, although the BBC, which advertises its "unparalled global expertise" (sic) between news bulletins and other programmes, reckons the Arab Spring caused the restiveness in Saudi Arabia.

This said, the Saudis and their Pakistani poodles can foment (Sunni) Arab and Baluch disorder in Khuzestan and Sistan / Iranian Baluchistan.

The Rev Kev , July 5, 2018 at 4:51 am

Oh my. I forgot all about the Shiites of the Eastern Provinces. Thanks for correcting that omission.

ex-PFC Chuck , July 5, 2018 at 7:53 am

And Bahrain is also predominantly Shiite, although ruthlessly ruled by Sunnis. And they're restive Shiites at that.

Clive , July 5, 2018 at 7:27 am

I always wonder to myself when, on the BBC News Channel, they pan across the alleged newsroom in New Broadcasting House and you see all those desks -- rows upon rows of them -- where people are sat, or, occasionally, get up and have a wander around, what the heck are they doing there? It can't be producing news reports because you see the same half a dozen so-called news "stories" stripped endlessly across the schedule throughout the day.

Every so often we get "business" news, which is someone from a spread betting company piffling on about some rot or other then "a look at the markets", not, unfortunately, a view of Covenant Garden or something, that would be more interesting, but rather some mysterious figures from world indices and forex rates splayed across the screen like some inscrutable hieroglyphs.

Then a bit of sport, with a dash of added jingoism.

Finally, some rally round the flag update on "the forces" with some top brass on the poop deck of an aircraft carrier looking for an F35 ("F35 coming real soon"). Maybe Sophie Rayworth in a tank.

Or alternatively it's Jenny Hill from Berlin with something about sausages and Merkel with stock footage of people drinking beer from unfeasibly large glasses wraps it all up apart from a sky diving granny then the weather.

Is it some kind of comedy, I ask at this point ?

The Rev Kev , July 5, 2018 at 8:08 am

It could be worse. We all could work in one of these places. It would not matter how great a story you found, it would all have to get through the editors who report directly to their owners like with the Murdoch press. The stuff you talk about is just the stuff that gets the editorial nod i.e. pure pap.
Some of the stuff that I have seen on Australian TV, however, is nothing less than out and out propaganda. I watch some of this stuff and I compare it with what I read on this site or what a commentator chips in with and I wonder what these newsreaders actually are thinking as they read some of these stories. Probably their steady pay packets.

Clive , July 5, 2018 at 8:20 am

I briefly watched ABC a couple of months ago. I thought I'd tuned into The War Channel. How on earth did that happen?

The Rev Kev , July 5, 2018 at 8:58 am

I wish to god I knew. I have seen this creeping in the past decade or more. I suspect that a lot of bad practices are imported from overseas. There are international conferences for conservative political parties so you would have American Republicans, British Conservatives, Australian Coalition, etc. all mixing together and swapping idea and techniques. They even work together when there is an election in their country.
Just the other day I heard one Coalition member describe another as a "patriot" which you NEVER hear in Oz. Kinda like a Republican describing another Republican as a good Communist. You just never hear it. We even have an ex-Prime Minister that sounds like he could be a good buddy to Mark Rubio running around trying to blow up his own party (currently in power) saying that we should build as many coal power stations as possible because climate change is not real.
Historically our governments have been ruled by pragmatism and past US governments have labelled us as "socialist" due to adopting such things as single-payer health. The past few years I am noting more and more ideologues going into politics who want to drag the country into their way of thinking whether it is to pick fights with China (our major trade partner) or send the Australian military to the ends of the earth as if they were Mercenaries-r-us. The times they are a changing.

ambrit , July 5, 2018 at 10:48 am

It all reminds me of C S Lewis' description of H -- as a giant bureaucracy. "The Screwtape Letters" were written at the end of WW-2 and still come across as 'fresh.'

upstater , July 5, 2018 at 9:41 am

Supposedly the KSA funded development of the Pakistani bomb. There probably is some agreement to hand some over (if it hasn't already been done) for "existential threats" This could turn very bad very fast.

PlutoniumKun , July 5, 2018 at 5:02 am

Iran has lots of options. Their Navy wouldn't last very long in a hot war but they have lots of asymetric options. They have reverse engineered Russian torpedoes and these could be launched from land or from mini-subs in shallow waters (where they are far harder to detect), making life very difficult for opponents, let alone tankers. They can strike the UAE and much of Saudi Arabia using a wide variety of ballistic missiles. To prevent this, the US would have to strike Iranian territory, and this would cause a massive escalation. In almost any scenario, the Straits would be shut down for many months, and this would be catastrophic for the world economy. Asia would come off worse as they are most dependent on LNG and oil from that region.

As you say, the great 'unsaid' is the Taliban. If Iran decided it was in their interest to supply them with a few dozen trained operators with a few thousand anti-tank missiles and manpads, then its goodbye Kabul.

Felix_47 , July 5, 2018 at 11:02 am

The Iranians hate the Taliban and Al Quaeda and ISIS a lot more than we do since we are on Saudi Arabia's side. They also seem to follow their principles. Don't forget our allies and proxies in Syria are the headcutters and madmen ..all Sunnis ..although our government does not want to admit it. They would be a lot smarter to trigger a Shiite uprising in Saudi Arabia and shut the country down. The Shiites in Saudi are downtrodden and abused.

Synoia , July 5, 2018 at 12:20 pm

One tanker sunk would eliminate the carriage of oil.

The maritime insurers would not insure the tankers in a war zone.

I believe the insurance term is "Force Majeure"

Bill Smith , July 5, 2018 at 5:42 pm

What is the pipeline capacity to get around the straits? Much there?

Synoia , July 5, 2018 at 9:18 pm

What pipeline? There are pipeline from Iraq to the Mediterranean coast. I don't believe there are any from Saudi Arabia to the Mediterranean.

One has to remember:

Mechanical Engineers build weapons
Civil Engineers build Targets

To escalate a carrier sinking to nuclear war is, I believe a lose/lose proposition. Let say the Iranians sunk a carrier and the US Nuked Tehran.

The Iranians would not be in a forgiving mood at that point, and it would do little to remove the somewhat irritated Iranians along the northern side of the Persian Gulf. The irritated Iranians would initiate incidents over the impact of irradiated Iranians.

The US could nuke the Iranian Coast along the Persian Gulf, but, the gulf is not wide, and the result would be poor prospects for the US allies on the South side of the Gulf. In addition one does not know if nuking Shea would provoke a Sunni backlash against "the infidels, the Christian US."

One could argue that Christians and Nukes cannot be mentioned in the same sentence.

Ape , July 5, 2018 at 6:02 am

If you want to successfully occupy a society, they must believe you are willing and capable of genocide.

JIm Thomson , July 5, 2018 at 11:25 am

The Prologue of Robert Baer's "Sleeping With the Devil" outlines a potential scenario of a Shiite attack on the eastern Saudi oil fields. The sub-title is The Doomsday Scenario.
The book is about the US-Saudi relationship by a retired CIA officer. A very good read and part of trying to understand this entire mess.

TimmyB , July 5, 2018 at 3:12 pm

Exactly right. Logic dictates that if Iran is attacked, Iranian missiles will soon thereafter attempt to destroy all of the oil producing capacity selling to Europe, Japan and the US within range of its missiles. This means ships, oil fields, pipeline, ect. Oil prices would skyrocket, plunging the US, Japan and Europe into a deep economic downturn.

Why people ignore the outcome you provided is beyond me. If I were Iran, I'd do the same if Israel attacked too.

Bill Smith , July 5, 2018 at 5:56 pm

Your guess is that nobody will attack the Iranians after they attack the shipping to close the straits?

In the 1987 Iran attacked about 91 ships in the Gulf. The oil still flowed. On April 18, 1988 the US attacked and severely damaged a number of Iranian ships and bases. After that things started winding down. Then on July 3, 1988 the US shot down that Iranian airliner. Then things really quieted down.

What are the differences now? Iran: ballistic missiles and subs?

kimyo , July 5, 2018 at 3:45 am

which general should be put in charge of the u.s. military response to iran's threat?

the one who won the war in afghanistan? iraq? vietnam? syria?

surely we have somebody who is up to the task? a 'best of the best', 'with honors' kinda guy?

Antifa , July 5, 2018 at 8:17 am

There's Lt. General Riper, who played the Iranian side in the 2002 Millennium Challenge war games, "killing" 20,000 Navy personnel and "sinking" 16 American warships on the first day, so he knows better than to even start such a bottlenecked battle.

There's always General Farnsworth, the great grandson of Colonel Armstrong Custer. Farnsworth has worked for two decades in the Purchasing & Planning wing of the Pentagon -- three levels below daylight -- but his confidence in an immediate American victory Over There is indubitable.

Colonel Smithers , July 5, 2018 at 10:07 am

Thank you.

Custer's spawn? Super!

In similar vein, MI5's Eliza Manningham Buller is a descendant of Redvers Buller, British commander in the second Boer War, but much more of a realist and moderate.

The Rev Kev , July 5, 2018 at 10:48 am

Redvers Buller? Seriously? I have read a lot about his role in the Zulu War of 1879. Intriguing character being hard-fighting and hard-drinking and yet refused to wear his 1860 China medal on the grounds that it was an unnecessary war. And a descendant of his is head of MI5?

blennylips , July 5, 2018 at 2:54 pm

Here's a little character sketch of Redvers Buller, from " On the Psychology of Military Incompetence ", by Norman Dixon:

The leading character was the commander-in-chief, General Sir Redvers Buller. According to a contemporary description there could be no finer choice for our South African adventure: 'There is no stronger commander in the British Army than this remote, almost grimly resolute, completely independent, utterly fearless, steadfast and vigorous man. Big-boned, square-jawed, strong-minded, strong-headed Smartness sagacity administrative capacity He was born to be a soldier of the very best English type, needless to say the best type of all.
Unfortunately this assessment was at variance with the facts in all but two particulars. Firstly, he was indeed big. Secondly, though sadly lacking in moral courage, he was undoubtedly brave when it came to physical danger. In this respect, as in many others, he was not unlike Raglan of the Crimean War, and indeed some other commanders of subsequent years.
Of Sir 'Reverse' Buller, as he came to be known by his troops, Rayne Kruger writes: 'At the risk of marring [the] contemporary description it should be mentioned that his big bones were particularly well covered, especially in the region of the stomach, and that his square jaw was not especially apparent above a double chin. He had entered the army with no disadvantage, his mother being a Howard and niece of the Duke of Norfolk, and he was very wealthy, which was fortunate in view of his preference for a diet of ample good food and champagne.

Such examples of the Peter Principle, wherein people are raised to their own level of inefficiency, was never better illustrated than in the case of Sir Redvers Buller, who has been described as 'a superb major, a mediocre colonel and an abysmal general'. In this case, high-level military incompetence must be laid at the door of heroic leadership, for this was the quality which eventually put him where he could do the most damage to his own side.

The Rev Kev , July 5, 2018 at 9:07 am

I think that we found our best of the best-

https://www.youtube.com/watch?v=OXRi28W-ENY

Synoia , July 5, 2018 at 9:22 pm

Eggzactly

Expat , July 5, 2018 at 5:38 am

The US response will be that this unprovoked aggression is an act of war, etc. This ignores our own unprovoked act of aggression, the embargo.
In case any has forgotten, those dastardly Imperialist Japanese launched an "unprovoked" attack on Pearl Harbor because the US put Japan under an embargo.
Embargoes themselves are not acts of war, but blockades are. But this is all technical blather. The US is attempting to strangle Iran. Iran will attempt to strangle the Gulf Arabs and the US. If Iran starts firing missiles or blockading the straits, the US will attack Iran. Iran will in turn launch attacks on the Gulf states. This could drive oil over $200, perhaps higher.
If Iran were clever, they would institute some sort of quarantine or inspection in their territorial waters. Indeed, they should claim jurisdiction over the entire strait in the interest of international security (they could certainly find some US document somewhere and just change the names). Then they could stop every ship going in and out and spend a week or so inspecting each one for contraband, disease, etc. This would not be an act of war but would certainly provoke the US into striking first anyway.

vlade , July 5, 2018 at 6:38 am

Iran has already extended its territorial waters to 12 miles, as did Oman. Given that the strait is 29 miles at the narrowest, and that to deal with the amount of shipping, pretty much all of it passes through either Omani or Iranian territorial waters. Technically, Iran/Oman has right to stop any non "innocent" (read unarmed) shipping trough it territorial waters. Not sure what is Omani relationship with the US/Saudis at the moment, wasn't paying much attention to the Gulf.

Colonel Smithers , July 5, 2018 at 10:04 am

Thank you, Vlade.

The Omanis would stay out.

The variation of Islam practiced there is very different to Saudi Wahhabism.

Also, many foreigners there, not just Muslims, have Omani nationality.

Bill Smith , July 5, 2018 at 7:48 pm

Sounds like there are 4 miles in the center? The marked shipping lanes are all on the Oman side of the half way point.

JohnnySacks , July 5, 2018 at 9:35 am

Once the US decides to strike first, we're going to be on our own. The Saudis will be completely useless as they always were, understandably not wanting to be cannon fodder for US interests. And with most of Europe and Asia relying on gulf oil, our 'coalition of the willing' is going to be a bit shy of members.
But $200 a barrel and the US a solid producer? Seems to be some win-win money to be made for both Raytheon and Exxon-Mobil.

Felix_47 , July 5, 2018 at 11:04 am

No Saudi just like no rich American will give his life for his country .in the military. Life is just too good for them .why fight in the desert when you can cool it at a cafe in Munich ..why are all the Syrian men of fighting age in Munich and Hamburg? They don't want to fight for their country.

sierra7 , July 5, 2018 at 5:32 pm

Isn't that what the Kuwaiti leaders did during the "First Persian Gulf War"? They fled to Monaco .

EoinW , July 5, 2018 at 7:45 am

Considering the restraint Iran has shown regarding Israeli attacks in Syria, it's safe to assume they want to avoid war at all cost. Don't expect any acts of aggression from them. Talk of closing the strait is trying to see if there is any spark of independence left in Europe's political elite. Unfortunately the Europeans only care about money – what they get personally from the US to run their countries and what their corporations get from doing business with America. There just isn't enough business between Iran and Europe to offset that. Now the more unreasonable Washington becomes the more uncomfortable its allies become, however they will still hold their noses and answer the call to duty. I'm afraid Iran's courting Europe will produce little to help them. Luckily China and Russia, even Turkey and India, are far more important.

The nice thing for Iran's hardliners – assuming the MSM narrative that they are nasty terrorists always looking to cause trouble – is that they don't need to take aggressive action to start a war. They've got America/Israel and that's the cause of every war in the 21st century. That pairing will decide if and when there is to be a war. Russia and China might have the ability to provoke caution but Iran doesn't.

Do not expect any actions from the Iranians to provoke a war. It's a war they cannot win and they know it. it's also a war they can't lose but the price they could pay by surviving might be really horrific. I'm not sure they'd close the strait even in a shooting war because that would risk further escalation. The moment America starts bombing Iran the law of diminishing return kicks in. The US will be looking for any excuse to go nuclear. Therefore I doubt Iranian resistance will be more than defensive. Hopefully Russia is providing them with air defences to be able to shoot down some US planes. Just lay low and ride out the storm. That's been the philosophy of US/Israeli opponents in the Middle East this decade. It's why the Russians take so much crap and keep turning the other cheek. They understand that either they lose such a war or, if they are winning they risk the US going nuclear. Iran can't win a war with America. Iran, however, can inflict unacceptable casualties but then they run the same risk of Washington going nuclear in retaliation. In Asian capitals you have rational players who understand that a nuclear war must be avoided if possible. Thus they avoid any aggressive actions which they fear could lead to such a war. The problem humanity has is that we're not sure if there are any rational players in Washington or Tel Aviv.

Kilgore Trout , July 5, 2018 at 9:53 am

"The problem humanity has is that we're not sure if there are any rational players in Washington or Tel Aviv."
+1
Given our belief in being an "exceptional nation" hasn't this been humanity's problem since the end of WW2?

Synoia , July 5, 2018 at 9:23 pm

hasn't this been humanity's problem since the end of WW2?

No. Ask the Indians.

Ignacio , July 5, 2018 at 8:01 am

Will the sanctions pull Iran enough to such an escalation? Would other countries (apart from Turkey) thing that this is troubling enough to risk US sanctions and disobey? There has been an escalation in language between the UE and US regarding Iran sanctions but it is still too soon to know what will be the EU position. We migth know after tomorrow's meeting in Vienna. I don't know what could happen but be sure the US is running out of "natural allies" by stepping up too much it's support for Saudi Arab. Trump is inaugurating a new era and it doesn't look pretty.

Tom Stone , July 5, 2018 at 9:20 am

Always bet on stupid.

Edward , July 5, 2018 at 9:38 am

Iran is now working with Russia. I wonder what discussions are occurring between these countries on this subject?

Bobby Gladd , July 5, 2018 at 12:22 pm

I have a relation who is a Marine Corps Major and Osprey pilot. His take on a serious major military conflict: "We are SO not ready."

blennylips , July 5, 2018 at 4:17 pm

Snafu agrees, in spades:

The Army might be in trouble but the Marine Corps WILL BE IN A HURT LOCKER FROM HELL if its ever called on to face Russian forces if they follow thru with published planning.

https://www.snafu-solomon.com/2018/07/dr-phillip-karber-on-russian-way-of-war.html

Bill Smith , July 5, 2018 at 7:55 pm

Lots of hype there – The Russians had a plan to invade the Ukraine! Shocking! Only 1 plan?

[Jul 06, 2018] Trump's Iran Gambit Won't Pay Off by Soraya Sepahpour-Ulrich

Notable quotes:
"... Offshore Technology ..."
"... * Soraya Sepahpour-Ulrich ..."
Mar 07, 2018 | www.opednews.com
By Soraya Sepahpour-Ulrich

It is as clear as day that President Trump is obsessed with regime change in Iran. What is not made clear is how much his gambit is damaging to Americans and American interests.

Without cause or justification, Mr. Trump pulled out of the Joint Comprehensive Plan Of Action (JCPOA), striking a hard blow to America's European allies – and its own credibility. Moreover, he threatened European countries with secondary sanctions should they continue to trade with Iran.

To top it all, in his latest move, he has called for all Iranian oil exports to be cut off by November. Or in practical terms, he is imposing an economic blockade on Iran. This is a similar scenario that was played out by the British in 1951 against Iran and Dr. Mossadegh – who was later overthrown in the 1953 British-US coup. But today, the IR of Iran is not the Iran of 1953, and the brunt of American demands and actions will not be borne by Iran alone.

Demanding that no country purchase oil from Iran is in fact an economic blockade. It is an illegitimate use of power to force a sovereign nation to surrender. It must be made clear however, that it is not just Iran that is the target here. The Trump administration's demands arean offensiveexercise of extraterritorial authority with no regard for sovereign equality between states. All states involved in trade with Iran will either have to cower to his demands or be punished.

But there is more than state sovereignty and indignation that is involved. These actions will have a dire effect on the economy of allies, and they will hit Americans in the wallet – hard. If Mr. Trump is giving a November deadline, he hopes to postpone the impact this will have on the November elections. He wants total rule over America before totally bankrupting it.

To fully appreciate how Mr. Trump intends to make 'America great again' where his policy regarding Iranian oil is concerned, one must take a look at some numbers and empirical evidence.

The oil strikes leading up to the toppling of Iran's Shah were felt around the world. During the 1978-79 revolution, Iranian oil production dropped 3.8 million barrels per day for 3 months. Although outside production increased by 1.8 million barrels to make up for the loss, the net loss to the world was 150 million barrels of oil. However, the compounding results of the production loss were significant around the globe.

Many Americans may recall the lines at the fuel pumps, but that was just what met the eyes. The increase in oil prices impacted farming, production, transportation of goods and services, and so on. At that time, China, currently the second biggest oil consumer behind America, was a net exporter of oil. The loss to U.S. economy was estimated at many billions of dollars in 1979 and 1980 (Deese and Nye 308-309) [i] .

Read also: When Netanyahu slept at the Kushners - media tales of Trump's Jewish confidants

More recent studies show that Iranian oil has a major impact on the U.S. economy even though America does not import a single barrel of oil from Iran. In 2008, economists Dean DeRosa and Gary Hufbauer presented a paper in which they claimed that if the United States lifted sanctions on Iran, the world price of oil could fall by 10 percent which would translate into an annual savings of $38-76 billion for the United States [ii] .

But sanctions alone were not responsible for oil price hikes in 2008 and beyond. In July 2008, oil had reached a peak of $142.05/bbl (see chart HERE ). This price hike came on the heels of some important events. In May, President Bush sent a ' warning message' to Iran on the same day that additional aircraft carriers with guided-missile destroyers were sent to the Persian Gulf.

In June of the same year, the New York Times reported that: "Israel carried out a major military exercise earlier this month that American officials say appeared to be a rehearsal for a potential bombing attack on Iran's nuclear facilities."

In July, then presidential candidate Barak Obama asked for tougher sanctions to be imposed on Iran.

It was not until September 2008 when President Bush declined to help Israel attack Iran that oil prices started to relax. They hit a low of just over $53 /bbl in December 2008.

Oil prices continued to rise again under Obama's sanctions and reached well past the $100 mark. The prices climbed down once again during the JCPOA negotiations reaching an all time low of $30.24/bbl in January 2016 – after the signing of the JCPOA.

Today, oil prices stands at $74.30/bbl. A fact not lost on any American who has filled up his/her gas tank lately– and paid for groceries. The deadline for Iran oil cut off is yet months away, but the impact has started.

Given that other countries may step in to compensate for some of the Iranian oil loss, other factors which effect prices must be considered – the most important of which is the security of the Strait of Hormuz. As mentioned previously, the British oil blockade scenario of 1951 will have far different consequences in 2018 should America impose an economic blockade or oil embargo.

Read also: 'Infamous liar': Iran blasts Netanyahu for claims Tehran had nuclear weapons program

In the 1950's, Iran did not have the military might to retaliate to the oil embargo and the naval blockade was aimed at crushing the economy in order to bring about regime change. This economic blockade, should it be allowed to happen, would crush the economy of much of the world.

As it stands, 35% of seaborne oil goes through the Strait of Hormuz 85% of which goes to Asian markets. As the US Energy Information Administration (EIA) has stated: "The blockage of the Strait of Hormuz, even temporarily, could lead to substantial increases in total energy costs."Today, Iran not only has the military might to block the Strait of Hormuz in retaliation, but it also has the legal right.

The 1982 United Nations Convention on the Law of the Sea (UNCLOS) stipulates that vessels can exercise the right of innocent passage, and coastal states should not impede their passage. Under UNCLOS framework of international law, a coastal state can block ships from entering its territorial waters if the passage of the ships harms "peace, good order or security" of said state, as the passage of such ships would no longer be deemed "innocent" [iii] . Saudi Arabia and the UAE export oil through Iran's territorial waters. Should they help America choke Iran's economy, their passage is not deemed 'innocent'.

Even if Iran simply chooses to merely delay the passage of tankers by exercising its right to inspect every hostile oil tanker that passes through the Strait of Hormuz, such inspections and subsequent delays would contribute to higher oil prices.

No doubt, the Iranian navy is no match for the formidable US navy. However, the shallow, narrow waters of Hormuz do not allow for the maneuvering of US battleships. The very presence of warships can lead to incidents. At its narrowest point, the Strait of Hormuz is 21 miles wide – hardly wide enough for a naval battle to take place and allow the passage of oil tankers at the same time. In recent years (2012), the USS Porter, a US navy destroyer, collided with an oil tanker in the Strait of Hormuz. The collision left a big whole in the navy destroyer.

American officials and oil companies have attempted to assuage the concern of over oil shortages by stating that America is one of the top oil producers. Some fact checking is in order.

According to EIA's latest available data, America's total exports in 2018 (thousands of barrels/month) was 7,730 bblin April. The same governmental body stated that total imports for the same month was 310,295. According to the EIA: "In 2017, the United States producedabout 15.4 million barrels of petroleum per day (MMb/d), and it consumed about 19.9 MMb/d. Imports from other countries help to supply demand for petroleum." (Click HERE for explanation of imports and exports).

Read also: After Greece and Cyprus, they prepare to attack Italy

These facts do not stop the spread of such news. As recently as June 4, 2018, Offshore Technology announced America is marching toward being the biggest oil producer. Important factors to bear in mind are that 1. America is the largest oil consumer and continues to have a deficit, and 2. Shale oil production is up thanks to higher oil prices.

While environmentalists objected to shale oil production, oil companies halted the extraction of oil when prices dropped. Anything above $50/bbl makes shale oil production feasible – which also makes it more expensive of the consumer. Although Mr. Trump and his administration have no regard for the environment, many states and countries have banned shale oil production (see LINK for list as of December 2017).

So the American people (and much of the rest of the world) is left with a stark choice. Either cave in to Mr. Trump's demands, accept loss of business, pay much higher oil prices at the pump and for consumer goods, prepare for a potential war, and sacrifice the environment – especially water, and mortgage the future of the earth more than we already have, or, don't heed Trump's demands – even if means a short term loss.

Either way, messing with Iran's oil exports is not an alternative that the world can afford. It may well be that Mr. Trumpis beholden to Mr. Netanyahu. He may well feel comfortable enough to subject the American people – and their allies to financial hardship; but the question is will Americans and the rest of the world sacrifice themselves at the Trump-Netanyahu altar?

* Soraya Sepahpour-Ulrich is an independent researcher and writer with a focus on U.S. foreign policy and the role of lobby groups in influencing US foreign policy.

[Jul 06, 2018] Trump magic: a couple more contra-interventions for lowering oil price on his part and we'll see $150 by Xmas.

Notable quotes:
"... Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes above $80 and stays there. ..."
Jul 06, 2018 | peakoilbarrel.com

George Kaplan,: 07/05/2018 at 6:36 am

Brent currently above $78 and heading up. A bad EIA twip stock report could mean it goes above $80 and stays there. Iran is threatening to blockade the Straits or Hormuz and Venezuela is threatening to invade the White House. The Saudis, Russians and E&Ps must be hoping for some more "art-of the deal" Trump magic: a couple more contra-interventions for lowering oil price on his part and we'll see $150 by Xmas.

[Jul 06, 2018] Ming Li paper

Notable quotes:
"... I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate. ..."
Jul 06, 2018 | peakoilbarrel.com

In the table below I have converted the data Dr. Minqi Li presented in metric tons per year to million barrels per day. Again, this is C+C plus natural gas liquids.

2017 At Peak Year Peak BPD Increase
us 11.47 15.08 2042 3.61
Saudi 11.29 12.17 2030 0.88
Russia 11.13 12.01 2033 0.88
Canada 4.74 7.85 2049 3.11
Iran 4.70 5.40 2039 0.70
Iraq 4.44 6.51 2042 2.07
China 3.S6 4.32 2015
UAE 3.53 4.38 2037 0.84
Kuwait 2.93 3.35 2040 0.42
Brazil 2.87 3.03 2025 0.16
Rest of W 27.13 33.22 2004
Total World 88.10 90.95 2021 2.85

The source for this chart is the same as the table above. I believe due to OPEC massively inflating their URR, and the inaccuracy of the Hubbert method due to the creaming of all giant fields, the expected peak dates here are highly inaccurate.

Well, all except three. The rest of the world did peak in 2004, China did peak in 2015, and the world will peak by 2021 or before. Congratulations to Dr. Minqi Li, the most accurate future peak there is the one that he calculated. Guym x Ignored says: 07/04/2018 at 8:10 am

I think Dr. Minqi Li put together an exceptionally well researched paper. The only one I have a faintest glimmer of knowledge in is oil. 2021. Give or take a couple of years is a good estimate of when peak oil occurs, based on current findings and technology. Improvements in either would probably only affect the tail of the decline rate. Which, based on the immense overstatement of EIA, and the creaming you mentioned, the tail should have much more of a decline than depicted. I am tending towards 2022 to 2023 as the final peak, due to the little over a year hiatus on the Permian final push due to pipeline and other constraints. We all know 2042 is a bad projection for the US, it will get there as soon as it can. It will get there as soon as it can, because the oil price will be high enough to beg, borrow, or steal to get there. For that reason, all other sources will be staining to get there at the same time. We are in the final stage, I do think.

Minqi Li x Ignored says: 07/04/2018 at 9:17 pm

Ron, many thanks for your very informative post about world oil (as always) and your comments on my post.

However, like much of the peak oil community, having missed some of the previous peak oil predictions, now I may err on the conservative side. Many have criticized the EIA projections and OPEC reserves. But again, even with those projections/reserves, the world oil production is still projected to peak in 2021. This suggests that world oil production may indeed peak in the near future. As I promised, I will follow up with part 2 on this.

Regarding China, China's oil consumption growth has re-accelerated as its oil production is in decline. This development may have some major impact on global economy/geopolitics in the coming years. On top of that, China is (or will soon become) the world's largest natural gas importer.

[Jul 05, 2018] Iran Warns Trump's Oil Ban Is 'Self Harm'

Jul 05, 2018 | news.antiwar.com

Iran's OPEC governor: Oil should not be used as a weapon

Jason Ditz Posted on July 4, 2018 July 4, 2018 Categories News Tags Iran The growing US pressure on the world to totally stop buying Iranian oil has produced a warning from top Iranian officials that the world economy, and America's economy in particular, would pay a severe price from such a ban .

President Hassan Rouhani

Iran's OPEC governor Hossein Kazempour Ardebili said the US ban amounted to "self harm," adding that Iran's position is that oil should not be used as a weapon or for political purposes. He predicted that higher oil prices would end up hurting the US economy.

Historically that has been the case, and with Saudi production already at record levels, Trump's expectation that the Saudis will make up for Iran's shortfalls are not realistic. Still, US officials continue to demand the world, including major Asian powers, stop buying from Iran.

Iranian President Hassan Rouhani downplayed the seriousness of the ban, saying he is confident Iran will survive this round of US sanctions as it has other sanctions in the past. Many coutries have not committed to the US ban, and if prices rise, Iran may ultimately take in just as much money even with fewer exports.

[Jul 04, 2018] World Energy 2018-2050 World Energy Annual Report (Part 1) " Peak Oil Barrel

Jul 04, 2018 | peakoilbarrel.com

World cumulative oil production up to 2017 was 192 billion metric tons. The world's remaining recoverable oil resources are estimated to be 276 billion metric tons and ultimately recoverable oil resources are estimated to be 468 billion metric tons. By comparison, the BP Statistical Review of World Energy reports that the world oil reserves at the end of 2017 were 239 billion metric tons.

World oil production is projected to peak at 4,529 million metric tons in 2021.

chart/
2017 Production and Peak Production are in million metric tons; Cumulative Production, RRR (remaining recoverable resources or reserves), and URR (ultimately recoverable resources) are in billion metric tons. For Peak Production and Peak Year, regular characters indicate historical peak production and year and italicized blue characters indicate theoretical peak production and year projected by statistical models. Cumulative production up to 2007 is from BGR (2009, Table A 3-2), extended to 2017 using annual production data from BP (2018).

[Jul 03, 2018] The squealing and consternation coming from the UK indicates that the empire changed course as for neoliberal globalization, and the UK is left out

The USA elite might now want abandoning of GATT and even WTO as it does not like the results. That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics.
Notable quotes:
"... The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980. ..."
"... the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence. ..."
"... A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production. ..."
"... The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors. ..."
"... In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still fighting yesterday's war, yesterday's hatred of all things Russian, yesterday's energy monopoly. ..."
"... I don't believe that the USA of WAR has changed or even intends to change the way they play their 'game'. The General Agreement on Tariffs and Trade set the trajectory for technology transfer, fabrication skills transfer, growth of academic and scientific achievement in 'other' countries (China, Russia etc). Their thoughts in the GATT deal were trade = economics = oligarchy = good. ..."
"... That single fraud on the west has had catastrophically perverse consequences for the coterie of killer's future and all because the designers of GATT had never thought outside the square of economics and failed utterly to grasp the gift of scientific and manufacturing politics. ..."
"... Canada and the gulf monarchies are the only countries with large reserves that are not hostile as yet to the US. As the US no longer is totally reliant on imports to meet its consumption, Saudi's, Bahrain and co are now expendable assets. ..."
Jul 03, 2018 | www.moonofalabama.org

karlof1 | Jun 29, 2018 5:51:08 PM | 32

Peter AU 1 @28--

The US still depends heavily on oil importation -- it is not "independent" in any manner whatsoever. Here's the most current data while this chart shows importation history since 1980.

As I've said before, the only time a biological or economic entity can become energy independent is upon its death when it no longer requires energy for its existence.

Peter AU 1 , Jun 29, 2018 6:11:54 PM | 33

karlof1 32

What I am looking at are strategic reserves, not how much oil is currently produced. With shale it now has those reserves and shale oil I think is now at the point where production could quickly ramp up to full self sufficiency if required. Even if the US were producing as much oil as they consumed, they would still be importing crude and exporting refined products.

A big part of the US move into the middle east post WWII was that they needed a strategic reserve for time of war and also they could see US consumption growing far larger than US production.

uncle tungsten , Jun 29, 2018 9:25:02 PM | 41
@Peter AU 1 #28 Thank you for that stimulating post. I just have to respond. And thanks to b and all the commenters here, it is my daily goto post.

The USA of WAR may have oil independence, but it is temporary. The race is on for release from oil dependency and China intends to win in my view. It is setting ambitious targets to move to electric vehicles and mass transit. That will give it a technology dominance, and perhaps a resource dominance in the EV sphere. We are in the decade of major corporate struggles and defensive maneuverings around China investments in key EV sectors.

In ten to twenty years' time the energy story could well be significantly different. The USA and its coterie of killers are still